Question

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.)

Answer 1

Requirement 1:

Date	Account title and Explanations	Debit	Credit
Jan 1, 2021	Buildings	$900,000.00
	Notes payable		$900,000.00
	[To record issuance of notes payable]

Requirement 2:

Date	Account title and Explanations	Debit	Credit
Jan 31,2021	Interest expense [900,000 x 5% x (1/12)]	$3,750.00
	Notes payable	$2,189.60
	Cash		$5,939.60
	[To record first monthly mortgage payment]

Requirement 3:

Date	Account title and Explanations	Debit	Credit
	Interest expense [(900,000-2,189.60) x 5% x (1/12)]	$3,740.88
	Notes payable	$2,198.72
	Cash		$5,939.60
	[To record second monthly mortgage payment]