Question

On July 1, Homer Simpson signed a 30-year home mortgage contract in the amount of $300,000....

On July 1, Homer Simpson signed a 30-year home mortgage contract in the amount of $300,000. The interest rate on the mortgage is 4.35%compounded monthly, making the monthly payments $1,493.44. The first payment is due on August 1 and the second payment is due on September 1. Homer is a dedicated accountant, so he records all of his household transactions in debit-and-credit format. The journal entry to record the second payment on September 1 includes

A DEBIT to Interest Expense of 1,086.03.

A DEBIT to Interest Expense of 407.41.

A DEBIT to Mortgage Payable of 1,087.50.

A DEBIT to Mortgage Payable of 1,086.03.

A DEBIT to Mortgage Payable of 405.94.
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Answer #1

Correct answer: A DEBIT to Interest Expense of 1,086.03

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

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