Whitmore Corporation Issues a £1,800,000, 10%, 10-year mortgage on December 31, 2014. The terms call for semi-annual installment payments of £144,435.The entry to record the first installment payment will include
A) a debit to Interest Payment of £144,435.
B) a debit to Mortgage Notes Payable of £54,435.
C) a debit to Interest Expense of £180,000.
D) a credit to cash of £144,435.

Question

Quizplus · Accepted Answer

The first installment payment includes both interest and principal repayment. The interest for the first period is £90,000 (10% annual rate on £1,800,000, divided by 2 for semi-annual), so the principal repayment is £54,435 (£144,435 total payment - £90,000 interest).

Whitmore Corporation Issues a £1,800,000, 10%, 10-Year Mortgage on December