Answer:
Explanation:
The journal entry is shown below:
(A) Cash A/c Dr $850,000
To Mortgage Note Payable $850,000
(Being issuance of the mortgage note payable is recorded)\
(B) Interest Expense A/c Dr $34,000
Mortgage Note Payable A/c Dr $15,156
To Cash A/c $49,156
(Being payment of the first installment is recorded)
The interest expense is computed below:
= Principal × rate of interest × number of months ÷ (total number of months in a year)
= $850,000 × 8% × (6 months ÷ 12 months)
= $34,000
The 6 months is calculated from December 31, 2014 to June 30, 2015
(C) Interest Expense A/c Dr $33,394
Mortgage Note Payable A/c Dr $15,762
To Cash A/c $49,156
(Being payment of the second installment is recorded)
The interest expense is computed below:
= Principal - first installment × rate of interest × number of months ÷ (total number of months in a year)
= $850,000 - $15,156 × 8% × (6 months ÷ 12 months)
= $34,000
The 6 months is calculated from December 31, 2014 to June 30, 2015
And, the remaining amount is debited to mortgage note payable
