Prepare any adjusting entry that is required at the end

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Reference no: EM132643802

On June 1, 2020, Whispering Winds Corporation reached out to Silverman Corporation about buying a parcel of undeveloped land. Silverman was asking for $258,000 for the land and Whispering Winds saw that there was some flexibility in the asking price. Whispering Winds didn't 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 must 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.

Question 1: Prepare the journal entry for the purchase of the land.

Question 2: 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.

Reference no: EM132643802

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