Question
On September 1, 2018, Speedy Lube signed a 30-year, $1,080,000 mortgage note payable to Jonstown Bank and Trust in conjunction with the purchase of a
On September 1, 2018, 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.) AMORTIZATION TABLE (12%, 30-YEAR MORTGAGE NOTE PAYABLE FOR $1,080,000; PAYABLE IN 360 MONTHLY INSTALLMENTS OF $11,110) Interest Period Payment Date Monthly Payment Interest Expense Principal Reduction Unpaid Balance Issue date Sept. 1, 2018 $ 1,080,000 1 Oct. 1 $ 11,110 $ 10,800 $ 310 1,079,690 2 Nov. 1 11,110 10,797 313 1,079,377 Required: b. Prepare journal entries to record the first two monthly payments on this mortgage. c. Complete this amortization table for two more monthly installmentsthose due on December 1, 2018, and January 1, 2019.
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