Question

Payment on mortgage payable


More Info wicked Wild Company plans to raise the capital by issuing $1,000,000 of 6%, five-year bonds on January 2, 2020. The bonds pay interest semiannually on June 30 and December 31. The company receives $998,800 when the bonds are issued. The company also issues a mortgage payable for $750,000 on January 2, 2020. The proceeds from the mortgage will be used to construct the new building. The mortgage requires annual payments of $50,000 i plus interest for fifteen years, payable on December 31 . The mortgage interest rate is 7%. Print Done

Answer 1

Answer

• The payment will include $ 50000 of principal plus 7% interest accrued for the year on $ 750000.
• The entry asked:

Date		Debit	Credit
31-Dec-20	Interest Expense [750000 x 7%]	$                        52,500
	Mortgage Payable	$                        50,000
	Cash		$                     102,500