Spirit World Corp. borrowed $500,000 in the form of a mortgage on January 1, 2017, to finance the purchase of a small warehouse. The mortgage rate is 5 percent, the term is 20 years, and semi-annual payments of $19,918 are made on January 1 and July 1. The following chart shows the first five mortgage payments:

Required
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, 2018, separating the current and long-term portions.

Transcribed Image Text:

6 Semi-annual Interest Period Jan. 1, 2017 July 1, 2017 Jan. 1, 2018 July 1, 2018 Jan. 1, 2019 July 1, 2019 Interest Expense 2.5% Cash Reduction of Principal Payment Principal $19,918 19,918 19,918 19,918 19,918 $12,500 12,315 12,124 11,930 11,730 $7,418 7,603 7,794 7,988 8,188 $500,000 492,582 484,979 477,185 469,197 461,009