Business, 10.04.2020 17:55, bloom826

Talkington Electronics issues a R$400,000, 8%, 10-year mortgage note on Decem- ber 31, 2016. The proceeds from the note are to be used in financing a new research laboratory. The terms of the note provide for annual installment payments, exclusive of real estate taxes and insurance, of R$59,612. Payments are due on December 31.

a) Show how the total mortgage liability should be reported on the statement of financial position at December 31, 2017.

b) Assume that Talkington Electronics prepares annual adjusting entries on March 31 each year.

1) Prepare the required adjusting entry on March 31, 2017.

2) Prepare the entry for the first installment payment on December 31, 2017.

3) Under these revised facts, would your answer to (c) in the text change? Why or why not?

4) What is the total amount of interest expense that will be recognized over the life of the mortgage? Given that it is probable that the interest will be paid, explain why the total amount of interest is not recognized as a liability on the March 31, 2017, balance sheet.

Answers: 2

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Talkington Electronics issues a R$400,000, 8%, 10-year mortgage note on Decem- ber 31, 2016. The pro...