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Untitled Document14 - MortgagePayable .The .Amortgage...

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Mortgage Payable The long-term financing used to purchase property is called a mortgage. The  property itself serves as collateral for the mortgage until it is paid off. A mortgage  usually requires equal payments, consisting of principal and interest, throughout  its term. The early payments consist of more interest than principal. Over the life  of the mortgage, the portion of each payment that represents principal increases  and the interest portion decreases. This decrease occurs because interest is  calculated on the outstanding principal balance that declines as payments are  made. The Stats Man obtains a fifteen-year $175,000 mortgage with a 7.5% interest rate  and a monthly payment of $1,622.28. The borrowing and receipt of cash is  recorded with an increase (debit) to cash and an increase (credit) to mortgage  payable. When a payment is made, mortgage payable is decreased (debited) for 
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