On June 1, 2020, Ayayai Corporation approached Silverman Corporation about buying a parcel of undeveloped land. Silverman was asking $265,000 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 5%. 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.

A.

Name of buying company
Asking price of land
Face amount of note
Purchase date
Interest rate in note
Effective interest rate
Term of note
Company's year end date

B. Calculate the purchase price of the land.

Future Value (FV)
Number of periods (N)
Payment (PMT)
Rate
Present value (PV)
Type

Prepare an effective interest amortization table for the term of the mortage note payable that is given in the exchange.

Date	Cash Paid	Interest Expense	Discount Amortisation	Note Carrying Amount

C. Journal Entries

Date	Account Tittle	Debit	Credit

D.

E.

MORTGAGE NOTE Name of Company Partial Statement of Financial Position Date INSTALMENT NOTE Name of Company Partial Statement of Financial Position Date 2020 2020 2021 2022 2021 Name of Company Partial Income Statement Date Name of Company Partial Income Statement Date 2020 2021 2022 2020 2021 What is the difference between a promissory note payable and a mortgage note payable? Why would the seller insist on obtaining a mortgage note payable from the buyer? (This question relates to parts (a) to (d)) (enter your answer in the text box below) What are the advantages and disadvantages of the promissory note (from part (a)) and the instalment note (from part (e)) for the buyer? Which one would you recommend to the buyer? (enter your answer in the text box below) MORTGAGE NOTE Name of Company Partial Statement of Financial Position Date INSTALMENT NOTE Name of Company Partial Statement of Financial Position Date 2020 2020 2021 2022 2021 Name of Company Partial Income Statement Date Name of Company Partial Income Statement Date 2020 2021 2022 2020 2021 What is the difference between a promissory note payable and a mortgage note payable? Why would the seller insist on obtaining a mortgage note payable from the buyer? (This question relates to parts (a) to (d)) (enter your answer in the text box below) What are the advantages and disadvantages of the promissory note (from part (a)) and the instalment note (from part (e)) for the buyer? Which one would you recommend to the buyer? (enter your answer in the text box below)