On June 1, 2020, Ayayai Corporation approached Silverman Corporation about buying a parcel of undeveloped land. Silverman was asking $240,000 for the land and Ayayai saw that there was some flexibility in the asking price. Ayayai did not have enough money to make a cash offer to Silverman and proposed to give, in return for the land, a $305,000, five-year promissory note that bears interest at the rate of 4%. The interest is to be paid annually to Silverman Corporation on June 1 of each of the next five years. Silverman insisted that the note taken in return become a mortgage note. Silverman accepted the amended offer, and Ayayai signed a mortgage note for $305,000 due June 1, 2025. Ayayai would have had to pay 10% at its local bank if it were to borrow the cash for the land purchase. Silverman, on the other hand, could borrow the funds at 9%. Both Ayayai and Silverman have calendar year ends.

Using (1) factor tables, (2) a financial calculator, or (3) Excel function PV, 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. (Hint: Refer to Chapter 3 for tips on calculating.) (For calculation purposes, use 5 decimal places as displayed in the factor table provided and round final answers to O decimal places, e.g. 5,275.) Purchase price of the land ta Date Cash Paid Interest Expense Discount Amortized Carrying Amoun June 1 2020 $ June 1 2021 $ $ $ June 1 2022 June 1 2023 June 1 2024 June 1 2025 $ $ Prepare the journal entry for the purchase of the land. (Round answers to O decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) Date Account Titles and Explanation Debit Credit June 1, 2020 Land Notes Payable Prepare any adjusting 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. (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31, 2020 June 1, 2021