A company takes out a five-year, $100,000 mortgage on October 1. The interest rate on the loan is 8% per year, and blended payments of $2,027.64 (including both interest and principal) are to be made at the end of each month.
Required:
a. The monthly payments will be the same amount each month, throughout the entire term of the loan. Will the interest expense be the same amount each month? Explain briefly.
b. Prepare a loan amortization table for this mortgage, similar to the one in Exhibit 10-1. If you do this using a computer spreadsheet such as Excel, you can easily prepare the table for the entire term of the mortgage; if you do it manually, prepare the table for just the first three months.
c. Give the journal entries to record the inception of the loan and the first three interest payments.