When recording a mortgage payment made by a borrower, the borrower will: Group of answer choices a. debit cash, and credit interest expense. b. debit cash, and credit both interest expense and mortgage payable. c. debit mortgage payable, and credit interest expense. d. debit both interest expense and mortgage payable, and credit cash.
Question
When recording a mortgage payment made by a borrower, the borrower will: Group of answer choices
a. debit cash, and credit interest expense.
b. debit cash, and credit both interest expense and mortgage payable.
c. debit mortgage payable, and credit interest expense.
d. debit both interest expense and mortgage payable, and credit cash.
Solution 1
The correct answer is:
b. debit cash, and credit both interest expense and mortgage payable.
Here's why:
When a borrower makes a mortgage payment, it reduces the amount of cash they have on hand. Therefore, they would debit (decrease) their cash account.
The mortgage payment is typically split into two parts: the interest expense and the repayment of the principal (the original amount borrowed). The interest expense is a cost of borrowing money, so the borrower would credit (increase) their interest expense account.
The repayment of the principal reduces the amount the borrower owes, so they would also credit (decrease) their mortgage payable account.
So, the borrower's journal entry for a mortgage payment would include a debit to cash and credits to both interest expense and mortgage payable.
Solution 2
The correct answer is:
b. debit cash, and credit both interest expense and mortgage payable.
Here's why:
When a borrower makes a mortgage payment, it reduces the amount of cash they have on hand. Therefore, they would debit (decrease) their cash account.
The mortgage payment is then split into
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