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9 December, 07:30

Delmar Company purchased a building on January 2 by signing a long-term $480,000 mortgage with monthly payments of $4,400. The mortgage carries an interest rate of 10 percent. The entry to record the first monthly payment will include a Group of answer choices

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  1. 9 December, 07:37
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    Answer and Explanation:

    The journal entries are shown below:

    For the month of January

    Cash $480,000

    To Mortgage Payable $480,000

    (Being the mortgage payable is recorded)

    For recording this we debited the cash as it increased the assets and credited the mortgage payable as it also increased the liabilities

    For the month of February

    Mortgage Payable $400

    Interest Expense $4,000 { ($480,000 * 10%) : 12 months}

    To Cash $4,400

    (Being the cash paid is recorded)

    For recording this we debited the mortgage payable and interest expense as it decreased the liabilities and increased the expenses and credited the cash as it decreased the assets

    Now the balance left is

    Beginning balance of Mortgage Payable $480,000

    Less: February Deduction (400)

    Ending Balance of Mortgage Payable $479,600
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