Glen Pool Club, Inc., has a $150,000 mortgage liabilty. The mortgage is payable in monthly installments of $1,543 , 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. Prepare the journal entry to record the second monthly paymment. Will monthly interest increase, decrease or stay the same over the life of the loan? Explain.

Glen Pool Club, Inc.

1. Monthly Pay:   $1,542.92

2. Monthly Amortization Schedule

Monthly Amortization Schedule  

 DateBeginning BalanceInterestPrincipalEnding Balance

17/2021$150,000.00$1,500.00$42.92$149,957.08

28/2021$149,957.08$1,499.57$43.35$149,913.73

3. Journal Entry:

Debit Interest $1,499.57

Debit Mortgage Liability $43.35

Credit Cash $1,542.92

To record the second monthly payment.

4. Monthly interest will continue to decrease over the life of the loan because part of the principal is being repaid with each monthly payment.  Therefore, the next monthly balance will reduce.  It is with this monthly balance that the interest for the month is computed.  So, interest will continue to decrease.

Explanation:

a) Data and Calculations:

Mortgage liability = $150,000

Monthly installment payment = $1,543

Annual interest rate = 12%

Monthly Pay:   $1,542.92

Home Price  150000

Down Payment  0  %

Loan Term  30  years

Interest Rate  12

Calculate  

Monthly Pay:   $1,542.92

Total of 360 Mortgage Payments$555,450.80

Total Interest$405,450.80

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