Answer and Explanation:
The journal entries are shown below:
For the month of January
Cash $480,000
To Mortgage Payable $480,000
(Being the mortgage payable is recorded)
For recording this we debited the cash as it increased the assets and credited the mortgage payable as it also increased the liabilities
For the month of February
Mortgage Payable $400
Interest Expense $4,000 {($480,000 × 10%) ÷ 12 months}
To Cash $4,400
(Being the cash paid is recorded)
For recording this we debited the mortgage payable and interest expense as it decreased the liabilities and increased the expenses and credited the cash as it decreased the assets
Now the balance left is
Beginning balance of Mortgage Payable $480,000
Less: February Deduction (400)
Ending Balance of Mortgage Payable $479,600
