Pacific Spirit Corp. borrowed $500,000 in the form of a mortgage on January 1, 2014, to finance the purchase of a small warehouse. The mortgage rate is 5 percent and the term 20 years, and semiannual 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, 2014.
2. Show the balance-sheet presentation of this mortgage on December 31, 2015, separating the current and long-term portions.

Transcribed Image Text:

Semiannual Interest Expense 2.5% Principal Balance $500,000 492,582 484,979 477,185 469,197 461,009 Cash Reduction of Principal Interest Period Payment Jan. 1, 2014 July 1, 2014 Jan. 1, 2015 July 1, 2015 Jan. 1, 2016 July 1, 2016 $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