Question

On January​ 1, 2018, Brazos Company purchased equipment and signed a sixminusyear mortgage note for $ 186 comma 000 at 15​%. The note will be paid in equal annual installments of $ 49 comma 148​, beginning January​ 1, 2019. On January​ 1, 2019, the journal entry to record the first installment payment will include a​ ________. (Round your answer to the nearest whole​ number.)

Answer 1

The journal entry to record the first installment payment will include a​ debit to interest expense of $27,900, mortgage notes payable of $21,248 and a credit to cash account of $49,148

Step-by-step explanation:

For recording the first installment payment, we have to compute the interest amount which is given below:

Interest amount = value of Mortgage note × rate × year

= $186,000 × 15% × 1 year

= $27,900

Since we have to compute the installment for January​ 1, 2019, therefore, we take the one year period

Now, we have to compute the principal amount which equals tp

= Installment amount - interest expense

= $49,148 - $27,900

= $21,248

So, the journal entry would be

Interest expense A/c Dr $27,900

Mortgage note payable A/c Dr $21,248

To Cash $49,148

(Being payment of the first installment recorded)