On 1 January 2017,Bratios Company purchased equipment and signed a 6-year mortgage payable for $160,000 at 15%.The mortgage will be paid in equal annual instalments of $42,278,beginning 1 January 2018.The journal entry to record the first instalment payment on 1 January 2018 will include a:
A)credit to Mortgage payable for $160,000.
B)debit to Interest expense for $24,000.
C)debit to Mortgage payable for $42,278.
D)credit to Cash for $18,278.

Question

Quizplus · Accepted Answer

The interest expense for the first year is calculated as 15% of $160,000, which equals $24,000. The journal entry will include a debit to Interest expense for this amount.

On 1 January 2017,Bratios Company Purchased Equipment and Signed a 6-Year