Question

t 1 of 2 Saved Hel On January 1, 2021, California Financial purchases a building for $900,000, signing a 5%, 20-year mortgage. Installment payments of $5,939.60 are due at the end of each month, with the first payment due on January 31, 2021. Required: 1.2.& 3. Record the issuance of the mortgage installment and the first two monthly mortgage payments. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Do not round intermediate calculations.) View transaction list Journal entry worksheet < 3 1 2 Record the issuance of a note payable on Jan 01, 2021 Note: Enter debits before credits Date General Journal Debit Credit January 01, 2021 Record entry Clear entry View general Journal

Answer 1

Answer :-

Date	General Journal	Debit	Credit
January 01, 2021	Building	$900,000
	To Notes Payable		$900,000
	(To record the issuance of note payable on Jan 1, 2021)
January 31, 2021	Interest Expenses (Note 1)	$3,750
	Note Payable ($5,939.60 - $3,750 )	$2,189.60
	To Cash		$5,939.60
	(To record first monthly mortgage payment on Jan 1, 2021)
February 28, 2021	Interest Expenses (Note - 2)	$3,740.88
	Note Payable ( $5,939.60 - $3,740.88)	$2,198.72
	To Cash		$5,939.60
	(To record the second monthly mortgage payment on February 28, 2021 )

Note 1 :-

Interest expense of First month = Principal Amount × Interest Rate × 1/12 month

Principal Amount = $900,000

Interest rate = 5%

Interest expense of first month = $900,000 x 5% x (1/12)

Interest expense of first month = $3,750

Note 2 :-

Interest expense of second month = (Principal Amount - Amount of note payable on first month) × Interest Rate × 1/12 month

Principal Amount = $900,000

Interest rate = 5%

Amount of note payable on first month = $2,189.60

Interest expense of second month= ( $900,000 - $2,189.60 ) x 5% x (1/12)

Interest Expense of second month = $3,740.88