Glen Pool Club, Inc., has a $154,000 mortgage liability. The mortgage is payable

Question

Glen Pool Club, Inc., has a $154,000 mortgage liability. The mortgage is payable in monthly installments of $2,171, which include interest computed at an annual rate of 12 percent (1 percent monthly).

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.)

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.)

Explanation / Answer

1

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.)

Month

Installment Paid

Beginning Mortgage Balance

Interest

Reduction in Mortgage Balance

Ending Mortgage Balance

A

B

C = B*1%

D = A-C

E=B-D

0

$                                                         -  

$             -  

$                  -  

$ 154,000

1

$                                                  2,171

$ 154,000

$   1,540

$               631

$ 153,369

2

$                                                  2,171

$ 153,369

$   1,534

$               637

$ 152,732

2

Journal entry to record the second monthly payment:

Account Title and Explanations

Debit

Credit

Interest Expense

$      1,534

Mortgage Payable

$          637

Cash

$   2,171

(Being mortgage installment paid and interest expense recorded)

1

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.)

Month

Installment Paid

Beginning Mortgage Balance

Interest

Reduction in Mortgage Balance

Ending Mortgage Balance

A

B

C = B*1%

D = A-C

E=B-D

0

$                                                         -  

$             -  

$                  -  

$ 154,000

1

$                                                  2,171

$ 154,000

$   1,540

$               631

$ 153,369

2

$                                                  2,171

$ 153,369

$   1,534

$               637

$ 152,732

2

Journal entry to record the second monthly payment:

Account Title and Explanations

Debit

Credit

Interest Expense

$      1,534

Mortgage Payable

$          637

Cash

$   2,171

(Being mortgage installment paid and interest expense recorded)

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