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On September 1, 2015, Speedy Lube signed a 30-year, $1,080,000 mortgage note payable to Jonstown Bank and

 

Trust in conjunction with the purchase of a building and land. The mortgage note calls for interest at an annual rate

 

of 12 percent (1 percent per month). The note is fully amortizing over a period of 360 months.

 

The bank sent Speedy Lube an amortization table showing the allocation of monthly payments between interest and

 

principal over the life of the loan. A small part of this amortization table is illustrated below. (For convenience,

 

amounts have been rounded to the nearest dollar.)

 


 

Instructions

 

1.

 


 

Explain whether the amounts of interest expense and the reductions in the unpaid principal are likely to

 

change in any predictable pattern from month to month.

 


 

2.

 


 

Prepare journal entries to record the first two monthly payments on this mortgage.

 


 

3.

 


 

Complete this amortization table for two more monthly installments?those due on December 1, 2015, and

 

January 1, 2016. (Round amounts to the nearest dollar.)

 

4. Will any amounts relating to this 30-year mortgage be classified as current liabilities in Speedy Lube's

 

December 31, 2015, balance sheet? Explain, but you need not compute any additional dollar amounts.

 


 

 

Paper#9209998 | Written in 27-Jul-2016

Price : $19
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