Preparation and Use of an Amortization TableOn September 1, 2011, Quick Lube signed a 30-y...

Preparation and Use of an Amortization Table

On September 1, 2011, Quick Lube signed a 30-year, $1,080,000 mortgage note payable toMifflinburg Bank and Trust inconjunction with thepurchase of a building and land. The mortgagenote calls for interest atanannual rate of 12 percent (1 percent permonth). The note is fully amortizingover a period of 360 months.The bank sent Quick Lube an amortization table showing the allocation of monthly paymentsbetween interest and principai over the life of the loan. Asmall part of this amortization table isillustrated below. (For convenience, amounts have been rounded to the nearest dollar.)

Instructions

a. Explain whether the amounts ofinterest expense and the reductions in the unpaid principal are likely to change in any predictable pattern from month to month.

b. Prepare journal entries to record the first two monthly payments onthis mortgage.

c. Complete this amortization table for two more monthly installments-those due on December 1,2011, and January 1,2012. (Round amounts to the nearest dollar.)

d. Will any amounts relating to this 30-year mortgage beclassified ascurrent liabilities in Quick Lube’s December 31, 2011, balance sheet? Explain,but you need not compute any additional dollar amounts.