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Crane Company purchased a building on January 2 by signing a long-term $480000 mortgage with monthly...

Crane Company purchased a building on January 2 by signing a long-term $480000 mortgage with monthly payments of $4300. The mortgage carries an interest rate of 10 percent.

The entry to record the first monthly payment will include a

credit to the Cash account for $4000.
credit to the Mortgage Payable account for $4300.
debit to the Cash account for $4300.
debit to the Interest Expense account for $4000.
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Answer #1
Correct Answer : Option D - debit to the Interest Expense account for 4000.
Working Notes :
S.NO Accounts Titles and Explanation Debit Credit
1 Mortgage Interest Expense (480000*10%*1/12 = 4000) 4000
Mortgage Payable (4300 - 4000) 300
              Cash 4300
(To record the first monthly payment)
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