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GPC, Inc has a $150,000 mortgage liability. The mortgage is payable in monthly instatement of $1,543, which include interest computed at an annual rate of 12 percent (1percent 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. (round to the nearest dollar).Prepare the journal entry to record the second monthly paymentWill monthly interest increase, decrease, or stay the same over the life of the loan ? explain your answer please, including why this case the amount of principal included in the first two payments is the same.

Question

GPC, Inc has a $150,000 mortgage liability. The mortgage is payable in monthly instatement of $1,543, which include interest computed at an annual rate of 12 percent (1percent monthly)

  1. 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).
  2. Prepare the journal entry to record the second monthly payment
  3. Will monthly interest increase, decrease, or stay the same over the life of the loan ? explain your answer please, including why this case the amount of principal included in the first two payments is the same.

 

check_circleAnswer
Step 1

Step 1:

Given:

Mortgage Liability = $ 150,000

Monthly Instalment = $1,543

Interest Rate           = 12% p.a. ( 1% per month)

Partial Mortgage Amortisation Schedule
Op
Instalment No. Principal
Unpaid
Monthly Instalment Interest Principal Principal
150000
1
1543
1500
43
149957
2
149957
1543
1500
43
149914
3
149914
1543
1499
44
149870
4
149870
1543
1499
44
149826
45
5
149826
1543
1498
149781
6
149781
149736
1543
1498
149736
45
7
1543
1497
46
149690
46
149690
1543
1497
149644
149644
9
1543
1496
149597
47
149597
10
1543
1496
47
149550
1496
47
149503
11
149550
1543
12
149503
1543
1495
48
149455
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Partial Mortgage Amortisation Schedule Op Instalment No. Principal Unpaid Monthly Instalment Interest Principal Principal 150000 1 1543 1500 43 149957 2 149957 1543 1500 43 149914 3 149914 1543 1499 44 149870 4 149870 1543 1499 44 149826 45 5 149826 1543 1498 149781 6 149781 149736 1543 1498 149736 45 7 1543 1497 46 149690 46 149690 1543 1497 149644 149644 9 1543 1496 149597 47 149597 10 1543 1496 47 149550 1496 47 149503 11 149550 1543 12 149503 1543 1495 48 149455

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Step 2

Payment of monthly instalment results in Cash/ Bank outflow i.e. Cash/Bank A/c is credited with the instalmen...

Journal Entry in the books of GPC
Amount Amount
in $
in $
Date
Particulars
Interest Expense A/c
Ref
Dr
1500
Mortgage Loan A/c
Dr
43
To Cash/Bank A/c
1543
(Payment of second monthly
instalment)
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Journal Entry in the books of GPC Amount Amount in $ in $ Date Particulars Interest Expense A/c Ref Dr 1500 Mortgage Loan A/c Dr 43 To Cash/Bank A/c 1543 (Payment of second monthly instalment)

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