On January 1, 2015, Lily Company purchased a building for $1,000,000. The company made a 25% down payment and took out a mortgage payable over 30 years with monthly payments of $5,503.23. The first payment is due February 1, 2015. 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. (Note: The 8% interest rate is compounded monthly.)

2. Make the journal entry necessary to record the first mortgage payment on February 1, 2015.