6. On June 1, 2020, Campbell Corporation approached Goldberg Corporation about buying a parcel of undeveloped land Goldberg was asking $240,000 for the land and Campbell felt flexibility in the asking price. Campbell did not have enough money to make a cash offer to Silverman and proposed to give, in return for the land, a $300,000 five-year promissory note that bears interest at the rate of 4%. The interest is to be paid annually to Goldberg Corporation on June 1 of each of the next five years. Goldberg insisted that the note taken in return become a mortgage note. Goldberg accepted the amended offer, and Campbell signed a mortgage note for $300,000 due June 1, 2022. Campbell would have had to pay 10% at its local bank if it were to borrow the cash for the land purchase. Goldberg, on the other hand, could borrow the funds at 9%. Both Campbell and Goldberg have calendar year ends.

Instructions:

(a) Discuss how Campbell Corporation would determine a value for the land in recording the purchase from Goldberg Corporation.

(b) What is the difference between a promissory note payable and a mortgage note payable? Why would Goldberg Corporation insist on obtaining a mortgage note payable form MacDougall Corporation?

(c) Using time value of money tables, a financial calculator, and computer spreadsheet functions, calculate the purchase price of the land and prepare an effective-interest amortization table for the term of the mortgage note payable that is given in the exchange.

(d) Prepare the journal entry for the purchase of the land.

(e) Prepare any adjusting journal entry that is required at the end of the fiscal year and the first payment made on June 1, 2021, assuming no reversing entries are used.

(f) Assume that Goldberg had insisted on obtaining an instalment note from Campbell instead of a mortgage note. Then do the following:

1. Using time value of money tables, a financial calculator, and computer spreadsheet functions, calculate the amount of the instalment payments that would be required for a five-year instalment note. Use the same cost of the land to Campbell Corporation that you had determined for the mortgage note in part (a).

2. Prepare an effective-interest amortization table for the five-year term of the instalment note.

3. Prepare the journal entry for the purchase of the land and the issuance of the instalment note.

4. Prepare any adjusting journal entry that is required at the end of the fiscal year and the first payment made on June 1, 2021, assuming no reversing entries are used.

5. Compare the balance of the two different notes payable and related accounts on December 31, 2020. Be specific about the classifications on the statement of financial position.

6. Why would Goldberg insist on an instalment note in this case?

NOTE: in excel please!