Question

Sunland Company receives $282,000 when it issues a $282,000, 10%, mortgage note payable to finance the construction of a building at December 31, 2022. The terms provide for annual installment payments of $47,000 on December 31.

Required:
Prepare an amortization schedule of a mortgage note for two years.

Answer 1

Date cash flow interest expense principal paid book value

D- 2022 282,000 0 0 282,000

D- 2023 -47,000 28,200 18,800 263,200

D- 2024 -47,000 26,320 20,680 242,520

Interest expense during first year = $282,000 x 10% = $28,200

Interest expense during second year = $263,200 x 10% = $26,320