Question

Preparing an amortization schedule and recording mortgages payable

entries

Kellerman Company purchased a building and land with a fair market value of

\(550,000 (building, \)425,000, and land, \(125,000) on January 1, 2018. Kellerman

signed a 20-year, 6% mortgage payable. Kellerman will make monthly payments of

\)3,940.37. Round to two decimal places. Explanations are not required for journal

entries.

Requirements

1. Journalize the mortgage payable issuance on January 1, 2018.

2. Prepare an amortization schedule for the first two payments.

3. Journalize the first payment on January 31, 2018.

4. Journalize the second payment on February 28, 2018.

Short answer

The mortgage payable account and interest expense account is debited with $1,196.37 and $2,744.04

Step-by-step solution

Definition of interest expense

The interest expense is the cost incurred by the company to arrange the funds to meet the financial requirements.

Journal entry of the payment

Date	Particular	Debit	Credit
February 28, 2018	Mortgage Payable	$1,196.33
	Interest Expense	$2,744.04
	Cash		$3,940.37
	(Being entry to record the second payment)