On January 1, 2013, Lily Company purchased a building for $2,000,000. The company made a 25% down payment and took out a mortgage payable over 30 years with monthly payments of $11,006.47. The first payment is due February 1, 2013. The mortgage interest rate is 8%.
1. Determine how much of the first two mortgage payments would be applied to interest expense and how much would be applied to reducing the principal.
2. Make the journal entry necessary to record the first mortgage payment on February 1, 2013.