Downey Corporation issues a $3,000,000, 12%, 20-year mortgage note payable on December 31, 2010, to obtain needed financing for the construction of a building addition. The terms provide for semiannual installment payments of $199,386 on June 30 and December 31.
Instructions
(a) Prepare the journal entries to record the mortgage loan on December 31, 2010, and the first installment payment.
(b) Will the amount of principal reduction in the second installment payment be more or less than with the first installment payment?
Correct Answer:
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