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

Question:

Glen Pool Club, Inc., has a $150,000 mortgage liability. The mortgage is payable in monthly installments of $1,825, 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.)

b. 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.)

Interest Expense

Interest expense presented in the income statement as non-operating expense.This usually arise from the borrowings, It is computed using the formula. Principal * Interest Rate * Time.

Answer and Explanation:

a.

Monthly payment Interest Expense Reduction in Unpaid Balance Unpaid Balance
150,000
1,825 1,500 325 149,675
1,825 1,497 328 149,347


b.

Account Title Debit Credit
Interest Expense 1,497
Mortgage payable 328
Cash 1,825

Learn more about this topic:

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How to Calculate Interest Expense: Formula & Example

from Financial Accounting: Help and Review

Chapter 5 / Lesson 18
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