Otto Electronics issues a $800,000, 8%, 10-year mortgage note on December 31, 2013. The proceeds from the note are to be used in financing a new research laboratory.

The terms of the note provide for semiannual installment payments, exclusive of real estate taxes and insurance, of $58,865. Payments are due June 30 and December 31.

Instructions

(a) Prepare an installment payments schedule for the first 2 years.

(b) Prepare the entries for (1) the loan and (2) the first two installment payments.

(c) Show how the total mortgage liability should be reported on the balance sheet at December 31, 2014.

*P10-6A On July 1, 2014, Strigel Corporation issued $5,000,000, 10%, 10-year bonds at

$5,679,533. This price resulted in an effective-interest rate of 8% on the bonds. Strigel uses the effective-interest method to amortize bond premium or discount. The bonds pay semiannual interest July 1 and January 1.

Instructions (Round all computations to the nearest dollar.)
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(a) Prepare the journal entry to record the issuance of the bonds on July 1, 2014.

(b) Prepare an amortization table through December 31, 2015 (3 interest periods) for this bond issue.

(c) Amortization $22,819

(c) Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2014.

(d) Amortization $23,731

(d) Prepare the journal entry to record the payment of interest and the amortization of the premium on July 1, 2015, assuming no accrual of interest on June 30.

(e) Amortization $24,681

(e) Prepare the journal entry to record the accrual of interest and the amortization of the premium on December 31, 2015.