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1 May, 17:22

On January 1, 2021, Gundy Enterprises purchases an office building for $151,000, paying $41,000 down and borrowing the remaining $110,000, signing a 7%, 10-year mortgage. Installment payments of $1,277.19 are due at the end of each month, with the first payment due on January 31, 2021.

Required:

a. Record the first monthly mortgage payment on January 31, 2021. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field. Do not round Intermediate calculations. Round your final answers to 2 decimal places.)

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  1. 1 May, 17:49
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    Dr mortgage payable $635.52

    Dr interest expense $641.67

    Cr cash $1,277.19

    Explanation:

    The first repayment made on the mortgage is $1,277.19, this amount can be broken into interest payment on the mortgage as well as the repayment of the principal of $110,000.

    interest for first month=$110,000*7%*1/12=$641.67

    Invariably the payment made comprises of $635.52 ($1,277.19-$641.67) principal repayment and interest payment of $641.67

    The entries would to debited mortgage payable with $635.52 and interest expense with $641.67 while cash is credited with $1,277.19
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