Thayer Company purchased a building on January 2 by signing a long-term $2,520,000 mortgage with monthly payments of $23,100. The mortgage carries an interest rate of 10 percent. The entry to record the first monthly payment will include a
A) debit to the Cash account for $23,100.
B) credit to the Cash account for $21,000.
C) debit to the Interest Expense account for $21,000.
D) credit to the Mortgage Payable account for $23,100.

Question

Quizplus · Accepted Answer

The interest expense for the first month is calculated as $2,520,000 * (10% / 12) = $21,000. The entry will include a debit to Interest Expense for this amount.

Thayer Company Purchased a Building on January 2 by Signing