Answer: Exhibit journal $
Date
January 1 2021
Land Dr. 800,000
Creditors. Cr. 800,000
Recognition of land purchased on four installment payment with 6% interest.
June 30,2021
Installment principal Dr 191,221.64
Installment Interest Dr 24,000
Bank Cr. 215,221.64
Narration. Payment of installment principal and interest as at date.
December 31,2021
Installment principal Dr 191,221.64
Installment Interest Dr. 24,000
Bank Cr. 215,221.64
Narration.Payment of installment principal and interest due for date.
B. The balance on notes payable and Interest as at December 31 2021 is zero.
Explanation:
The notes is recognised by increasing the creditors accounts with a credit posting while the land is recognised by debiting the asset accounts.
The interest elements which is calculated on the total sum of 800,000 per annum is divided into two and the results separated from the biannual installment payment, the interest elements will be equally debited to the income statement.
There is no outstanding installment or Interest to be paid as at December 31 2021 , though there is two equal installment and interest still outstanding on the loan but they will not be due until 2022 based on facility agreement.
