Question

on january 1, 2024, howell enterprises purchases a building for $151,000, paying $41,000 down and borrowing the remaining $110,000, signing a 7%, 10-year mortgage. installment payments of $1,277.19 are due at the end of each month, with the first payment due on january 31, 2024.

Answer 1

The transactions would debit the mortgage payment of $635.52, credit the cash account with $1,277.19, and credit the interest charge of $641.67.

A mortgage is what?

Although some lenders provide 20-year periods and others even let borrowers choose their own length, most fixed-rate mortgages have a 30-year or 15-year term. Before committing to a mortgage, homebuyers should take all available home loan options into account.

Payable Dr. Mortgage: $635.52

Dr interest expenditure $641.67 Cr cash $1,277.19

The initial payment made on the mortgage is $1,277.19, which may be divided into the principal repayment of $110,000 and the interest on the mortgage.

interest for the first month equals $110,000 * 7% * 1/12 = $641.67

Usually, the payment made consists of $635.52 ($1,277.19-$641.67) for the principal payments and $641.67 for the interest.

The entries would credit cash with $1,277.19, debit mortgage payment with $635.52, and debit interest charge with $641.67.

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