Glen Pool Club, Inc., has a $149,000 mortgage liability. The mortgage is payable in monthly installments of $2,100, which include interest computed at an annual rate of 12 percent (1 percent monthly).
| a. |
Prepare a partial amortization table showing (1) the original balance of this loan, and (2) the allocation of the first two monthly payments between interest expense and the reduction in the mortgage's unpaid balance. (Omit the "$" sign in your response.)
|
| Amortization Table |
| Monthly Interest Period |
(A)
Monthly Payment |
(B)
Interest Expense |
Reduction in Unpaid Balance |
Unpaid Balance |
| Original balance |
- |
- |
- |
$ |
| 1 |
$ |
$ |
$ |
|
| 2 |
|
|
|
|
|
| b. |
Prepare the journal entry to record the second monthly payment. (Omit the "$" sign in your response.) |
| General Journal |
Debit |
Credit |
| Interest expense |
|
|
| Mortgage payable |
|
|
| Cash |
|
|
|
| c. |
Will monthly interest increase, decrease, or stay the same over the life of the loan? |
|
|
|
|
Increase |
|
Stay the same |
|
Decrease |
|