Question

Glen Pool Club, Inc., has a $300,000 mortgage liability. The mortgage is payable in monthly installments of $3000, which include interest computed at an annual rate of 12 percent. Requirements;

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 to the nearest dollar.)

Answer 1

Requirement 1:

Original balance of this loan = $ 300,000

Requirement 2:

Original balance	Installment	Interest expense	Reduction in mortgage's unpaid balance	Closing balance
$                          300,000	$            3,000	$                     3,000	$                                       -	$             300,000
$                          300,000	$            3,000	$                     3,000	$                                       -	$             300,000

Interest expense = $ 300,000*12%*1/12 = $ 3,000