Glen Pool Club, Inc., has a $145,000 mortgage liability. The mortgage is payable

Question

Glen Pool Club, Inc., has a $145,000 mortgage liability. The mortgage is payable in monthly installments of $2,044, which include interest computed at an annual rate of 12 percent (1 percent monthly). a. Prepare a partial amortization table showing (1) the original balance of this loan, and (2) the allocation of the first two monthly payments between interest expense and the reduction in the mortgage’s unpaid balance. (Round your answers to the nearest dollar amount. Enter all amounts as positive numbers.) Prepare the journal entry to record the second monthly payment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)c. Will monthly interest increase, decrease, or stay the same over the life of the loan?

Explanation / Answer

a.

Amortization Schedule

b. Journal Entry

c. Monthly interest will increase over the life of the loan.

Year Opening Balance Principal Interest @ 1% Closing Balance 0 145000 - - 145000 1 144406 594 1450 144406 2 143806 600 1444 143806

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