Fordyce Electronics issues a $400,000, 8%, 10-year mortgage note on December 31,

2007. The proceeds from the note are to be used in financing a new research laboratory.
The terms of the note provide for semiannual installment payments, exclusive of real
estate taxes and insurance, of $29,433. Payments are due June 30 and December 31.

Complete the installment payments schedule for the first 2 years. (Round answers to 0
decimal places, e.g. 125. Use rounded amounts for future calculations.)

Prepare the entries for (1) the loan and (2) the first two installment payments. (For
multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3,

2.) Show how the total mortgage liability should be reported on the balance sheet at
December 31, 2008.

(a) Semiannual Cash Interest Reduction of Principal

Interest Period Payment Expense Principal Balance

Issue Date $400,000

1 $29,433 $16,000 $13,433 386,567
2 29,433 15,463 13,970 372,597
3 29,433 14,904 14,529 358,068
4 29,433 14,323 15,110 342,958
$57,042

(b) 2007
Dec. 31 Cash .............................................................400,000
Mortgage Notes Payable................................
400,000

2008
June 30 Interest Expense....................................................... 16,000
Mortgage Notes Payable.......................................... 13,433
Cash.................................................................
29,433

Dec. 31 Interest Expense....................................................... 15,463

Mortgage Notes Payable.......................................... 13,970
Cash.................................................................
29,433

(c) 12/31/08
Current Liabilities
Current portion of mortgage notes payable $ 29,639
**

Long-term Liabilities
Mortgage notes payable, due 2017 $342,958
**

**($14,529 + $15,110)
**($372,597 $14,529 $15,110)