Asked by david lopez on Jun 30, 2024
Verified
Which of the following statements is true?
A) With instalment payments on a non-current note payable, the principal portion decreases each period.
B) With instalment payments on a non-current note payable, the interest portion decreases each period.
C) With instalment payments on a non-current note payable, the interest portion does not change each period.
D) With instalment payments on a non-current note payable, the interest portion increases each period.
Non-current Note
a long-term financial obligation or loan that is not due for repayment within the next year or operating cycle of the business.
Instalment Payments
Payments made towards the cost of a purchase over a period, allowing the buyer to pay off the total amount owed in smaller, periodic amounts.
Principal Portion
The part of a loan payment that goes toward reducing the original loan amount, as opposed to the interest portion.
- Comprehend the principles of liability recognition and measurement, including contingent liabilities and instalment payments.
Verified Answer
ZK
Zybrea KnightJul 01, 2024
Final Answer :
B
Explanation :
With installment payments on a non-current note payable, the interest portion decreases each period because as the principal balance decreases with each payment, the amount of interest calculated on the decreasing principal also decreases.
Learning Objectives
- Comprehend the principles of liability recognition and measurement, including contingent liabilities and instalment payments.