Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

In each succeeding payment on an installment note, the amount of interest paid:

increases with each payment

remains the same for every payment

is unrelated to the outstanding principal

decreases with each payment

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Verified step by step guidance

Understand the concept of an installment note: An installment note is a type of loan where the borrower makes regular payments that include both principal and interest over the life of the loan.

Recognize the relationship between interest and principal: Interest is calculated based on the outstanding principal balance. As the principal balance decreases with each payment, the interest portion of the payment also decreases.

Break down the payment structure: Each payment consists of two components: interest (calculated on the remaining principal) and principal repayment. Initially, a larger portion of the payment goes toward interest, but as the principal decreases, the interest portion becomes smaller.

Apply the logic to the question: Since the interest is calculated on the outstanding principal, and the principal decreases with each payment, the amount of interest paid decreases with each payment.

Conclude the reasoning: The correct answer is 'decreases with each payment' because the interest portion is directly tied to the remaining principal, which diminishes over time.