Analyzing and Reporting Financial Statement Effects of Mortgages

On January $1,$ Patterson Inc. borrowed $$1,000,000$ on a $10\%,15-$year mortgage note payable. The note is to be repaid in equal semiannual installments of $$65,051($payable on June $30$ and December $31).$ Each mortgage payment includes principal and interest. Interest is computed using the effective interest method.

a$.$ Show computations to confirm the semiannual payment of $$65,051.$

Note: Do not use a negative sign.

PMT Inputs

RATE Answer $1$

$5$

NPER Answer $2$

$30$

PV Answer $3$

$65,051$

FV Answer $4$

$1,000,000$

b$.$ Prepare a mortgage amortization schedule for the first three years.

Note: Do not round intermediate calculation, if applicable.

Note: Round answer to the nearest dollar, if applicable.

Note: Do not use a negative sign.

Date Interest Expense Cash Paid Mortgage Repayment Carrying Amount

Jan $1$ Year $1$ Answer $5$

$0$

June $30$ Year $1$ Answer $6$

$0$

Answer $7$

$0$

Answer $8$

$0$

Answer $9$

$0$

December $31$ Year $1$ Answer $10$

$0$

Answer $11$

$0$

Answer $12$

$0$

Answer $13$

$0$

June $30$ Year $2$ Answer $14$

$0$

Answer $15$

$0$

Answer $16$

$0$

Answer $17$

$0$

December $31$ Year $2$ Answer $18$

$0$

Answer $19$

$0$

Answer $20$

$0$

Answer $21$

$0$

June $30$ Year $3$ Answer $22$

$0$

Answer $23$

$0$

Answer $24$

$0$

Answer $25$

$0$

December $31$ Year $3$ Answer $26$

$0$

Answer $27$

$0$

Answer $28$

$0$

Answer $29$

$0$

c$.$ Use the financial statement effects template to record the following:

$(1)$ issuance of the mortgage note payable,

$(2)$ payment of the first installment on June $30,$ and

$(3)$ payment of the second installment on December $31.$

Note: Use negative signs with answers when appropriate.

Note: If an answer field is not needed, leave it blank $($not all answer fields will be used$).$

Note: Round answer to the nearest dollar, if applicable.

BALANCE SHEET INCOME STATEMENT

Cash Noncash Contributed Earned Net

Transaction Asset Assets Liabilities Capital Capital Revenue Expenses Income

Issue mortgage Answer $30$

$0$

Answer $31$

$0$

Answer $32$

$0$

Answer $33$

$0$

Answer $34$

$0$

Answer $35$

$0$

Answer $36$

$0$

Answer $37$

$0$

Answer $38$

N$/$A

Answer $39$

N$/$A

Answer $40$

N$/$A

Answer $41$

N$/$A

Answer $42$

N$/$A

Answer $43$

N$/$A

Answer $44$

N$/$A

Make mortgage payment on June $30$ Answer $45$

$0$

Answer $46$

$0$

Answer $47$

$0$

Answer $48$

$0$

Answer $49$

$0$

Answer $50$

$0$

Answer $51$

$0$

Answer $52$

$0$

Answer $53$

N$/$A

Answer $54$

N$/$A

Answer $55$

N$/$A

Answer $56$

N$/$A

Answer $57$

N$/$A

Answer $58$

N$/$A

Answer $59$

N$/$A

Make mortgage payment on December $31$ Answer $60$

$0$

Answer $61$

$0$

Answer $62$

$0$

Answer $63$

$0$

Answer $64$

$0$

Answer $65$

$0$

Answer $66$

$0$

Answer $67$

$0$

Answer $68$

N$/$A

Answer $69$

N$/$A

Answer $70$

N$/$A

Answer $71$

N$/$A

Answer $72$

N$/$A

Answer $73$

N$/$A

Answer $74$

N$/$A

d$.$ What is the carrying value of the mortgage at the end of the second year?

Note: Do not round answers, if applicable.

Carrying amount at Dec $31,$ Year $2$: Answer $75$

$0$

e$.$ What amount would the company report as $$Current portion of mortgage$$ on the balance sheet at the end of the second year?

Note: Do not round answers, if applicable.

Current portion of mortgage at Dec $31,$ Year $3$ Answer $76$

$0$