On June 1, 2020, Whispering Winds Corporation approached Silverman Corporation about buying a parcel of undeveloped land. Silverman was asking $258,000 for the land and Whispering Winds saw that there was some flexibility in the asking price. Whispering Winds did not have enough money to make a cash offer to Silverman and proposed to give, in return for the land, a $315,000, 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 Whispering Winds signed a mortgage note for $315,000 due June 1, 2025. Whispering Winds 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 Whispering Winds and Silverman have calendar year ends.

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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 decimal places, eg,5,275.) Purchase price of the land $ Mortgage Note Payable - Interest Amortization Cash Paid Interest Expense Discount Amortized Note Carrying Amount $ $ $ $ $ Prepare the journal entry for the purchase of the land. (Round answers to decimal places, eg. 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 tities and enter for the amounts.) Date Account Titles and Explanation Debit Credit June 1, 2020 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 decimal places, eg. 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 Mortgage Note Payable Whispering Winds Corporation (Partial) Statement of Financial Position $ >