On January 1,Clive Corporation signed a $175,000,8%,30-year mortgage that requires semiannual payments of $7,735 on June 30 and December 31 of each year.The journal entry to record the first semiannual payment would be (round interest calculation to the nearest dollar)to:

Question

Quizplus · Accepted Answer

The semiannual payment of $7,735 consists of both interest and principal payments. To record the first semiannual payment, we need to adjust the mortgage payable balance and recognize interest expense.

The total interest for the first 6 months would be:

$175,000 × 8% × 6/12 = $7,000

Therefore, the journal entry to record the first semiannual payment would be:

Debit Interest Expense      $7,000
Debit Mortgage Payable      $  735
Credit Cash                          $7,735

Option B correctly reflects the debit and credit accounts and amounts. Option A incorrectly splits the total interest amount between Interest Expense and Mortgage Payable, and option D incorrectly separates Mortgage Expense instead of Mortgage Payable. Option C only accounts for the Cash transaction and not the interest or principal payments.

On January 1,Clive Corporation Signed a $175,000,8%,30-Year Mortgage That Requires