On January 1, Clive Corporation signed a $480,000, 5%, 30-year mortgage that requires semiannual payments of $15,530 on June 30 and December 31 of each year. The journal entry to record the second semiannual payment would be: (Round your final answer to the nearest dollar.)
A) debit Interest Expense, $11,912; debit Mortgage expense, $3,618; credit Cash, $15,530.
B) debit Interest Expense, $3,618; debit Mortgage Payable, $11,912; credit Cash, $15,530.
C) debit Interest Expense, $11,912; debit Mortgage Payable, $3,618; credit Cash, $15,530.
D) debit Mortgage Payable, $15,530; credit Cash, $15,530.
C) debit Interest Expense, $11,912; debit Mortgage Payable, $3,618; credit Cash, $15,530.
Explanation: step 1) figure interest and reduction in loan balance for first payment: principle × rate × time = interest, payment - interest = mortgage payable (reduction in loan balance). Step 2) determine interest and payable amounts for the second payment: principle (balance from step 1) × rate × time; payment amount - interest = payable amount. Ex:
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