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Superior Spirit Corp. borrowed $600,000 in the form of a mortgage on January 1, 2017, to finance the purchase of a large building.
Superior Spirit Corp. borrowed $600,000 in the form of a mortgage on January 1, 2017, to finance the purchase of a large building. The mortgage rate is 6% and the term is 20 years, and semiannual payments of $25,957.43 are made on January 1 and July 1. The following chart shows the first five mortgage payments.
Semiannual Interest Period Cash Payment Interest Expense Reduction of Principle Principle Balance
Jan. 1, 2017 $600,000
July 1 / 17 $25,957.43 18,000 7,957.43 592,042.57
Jan. 1 / 18 $25,957.43 17,761.28 8,196.15 583,846.42
July 1 / 18 $25,957.43 17,515.39 8,442.04 575,404.38
Jan. 1 / 19 $25,957.43 17,262.13 8,695.30 566,709.08
July 1 / 19 $25,957.43 17,001.27 8,956.16 557,752.92
1. Journalize the establishment of the mortgage and the first mortgage payment made on July 1, 2017.
2. Show the balance-sheet presentation of this mortgage on December 31, 2017, separating the current and long-term portions.
