Glen Pool Club, Inc., has a $150,000 mortgage liability. The mortgage is payable

Question

Glen Pool Club, Inc., has a $150,000 mortgage liability. The mortgage is payable in monthly installments of $2,261.00, 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. (Omit the "$" sign in your response.)

Amortization Table Monthly Interest Period

(A) Monthly Payment

(B) Interest Expense Reduction in Unpaid Balance Unpaid Balance Original balance

Explanation / Answer

Amortizaiton Table for 12% note payable for $150,000 payable in monthly installments of $2,261.

B. Interest Expense Dr. $1500

Mortgage Payable Dr. $761

Cash Cr. 2261

To record second monthly installment on mortgage payable

C. Decreases. Interest expense is based on the unpaid principal balance at the end of each month. As the unpaid pricipal balance decreases each period, interest expense will decrease also.

Monthly Interest Period A. Monthly Payment B. Interest Expense (1% of the last unpaid balance) Reduction in unpaid balance A-B Unpaid Balance Origional Balance 1 2261 1500 761 150000 2 2261 1500 761 149239

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