Question

Figure out if I did this right. Step by step please.

•The annual interest rate on the mortgage payable was 8.75 percent. Interest expense for one-half month should be computed because the building and land were purchased and the liability incurred on June 16.

I am not sure if it relates to some of the other transactions I have done, especially these two:

•June 16: A check in the amount of 7,250 was received for consulting revenue.

•June 16: Byte purchase the building and the land it is on for $119,000 to house its repair facilities and to store computer equipment. The lot on which the building is located is valued as $19,000. The balance of the cost is to be allocated through the building. Byte made a cash down payment of $11,900 and executed a mortgage for the balance. The mortgage is payable in eight equal annual installments beginning July 1.

•This is my answer

Jun 30 |Interest Expense| Accum. Interest Motgage Note| Debit 390.47

Jun 30 |Interest Payable| Accum. Interest Mortgage Note| Credit 390.47

Answer 1

To calculate the interest expense for one-half month, divide the annual interest rate by 12 to get the monthly interest rate. Then, multiply the principal amount by the monthly interest rate to find the interest expense for one month. Finally, divide the interest expense for one month by 2 to get the interest expense for one-half month.

Step-by-step explanation:

The interest expense for one-half month is computed based on the annual interest rate on the mortgage payable, which is 8.75 percent. To calculate the interest expense for one-half month, follow these steps:

1. Convert the annual interest rate to a monthly interest rate. Divide the annual interest rate by 12 to get the monthly interest rate. For example, 8.75 percent divided by 12 is approximately 0.7292 percent.
2. Calculate the principal amount of the mortgage payable. The principal amount is the balance of the cost of the building and land after the down payment. In this case, the principal amount is $119,000 - $11,900 = $107,100.
3. Multiply the principal amount by the monthly interest rate to find the interest expense for one month. For example, $107,100 multiplied by 0.7292 percent is approximately $780.09.
4. Divide the interest expense for one month by 2 to get the interest expense for one-half month. For example, $780.09 divided by 2 is approximately $390.05.