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) InterestPeriod PaymentDate MonthlyPayment InterestExpense PrincipalReduction UnpaidBalance 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 installments—those due on December 1, 2018, and January 1, 2019.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 installments—those due on December 1, 2018, and January 1, 2019.

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