On January 1, Stella Corporation signed a $500,000, 4%, 30-year mortgage that requires semiannual payments of $14,384 on June 30 and December 31 of each year. The journal entry to record the first semiannual payment would be: (Round your final answer to the nearest dollar.)
A) debit Interest Expense, $4,384; debit Mortgage Payable, $10,000; credit Cash, $14,384.
B) debit Interest Expense, $10,000; debit Mortgage Payable, $4,384; credit Cash, $14,384.
C) debit Mortgage Payable, $14,384; credit Cash, $14,384.
D) debit Interest Expense, $10,000; debit Mortgage expense, $4,384; credit Cash, $14,384.
B) debit Interest Expense, $10,000; debit Mortgage Payable, $4,384; credit Cash, $14,384.
Explanation: Interest expense = principle × rate × time, difference between payment and interest expense gives mortgage payable amount. Ex: $500,000 × 4% × 1/2 = $10,000 interest; $14,384 - $10,000 = $4,384 mortgage payable.
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