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IgorLugansk [536]

3 years ago

9

On January 1, 2021, Stoops Entertainment purchases a building for $610,000, paying $110,000 down and borrowing the remaining $50

0,000, signing a 9%, 15-year mortgage. Installment payments of $5,071.33 are due at the end of each month, with the first payment due on January 31, 2021.
a. Record the first monthly morgage payment on January 31, 2020.

1 answer:

yawa3891 [41]3 years ago

5 0

Answer:

January 31

Interest expense 3750(Dr.)

Notes payable 1321.33(Dr.)

Cash 5071.33(Cr.)

Explanation:

Purchase price = $610,000

Down payment = $110,000

Borrowing = $500,000

Period = 15 years

Rate = 9%

Installment Payment per month = $5,071.33

With first payment due on January 31, 2020;

Mortgage amount or carrying value = $500,000

Interest = 0.09 × (1/12) × 500,000 = $3,750

Monthly payment = $5,071.33

Decrease in carrying value or mortgage amount = $5071.33 - $3750 = $1321.33

January 31

Interest expense 3750(Dr.)

Notes payable 1321.33(Dr.)

Cash 5071.33(Cr.)

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