Multiple Choice
The journal entry to record the use of indirect materials in production is to:
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2. Transaction Analysis
Journal Entries: Debits and Credits
Multiple Choice
In each succeeding payment on an installment note, which of the following statements is correct?
A
Both the interest and principal portions of the payment remain the same throughout the note's life.
B
The entire payment is applied to interest until the final payment, which is applied to principal.
C
The portion of the payment applied to interest decreases, while the portion applied to principal increases.
D
The portion of the payment applied to interest increases, while the portion applied to principal decreases.
Verified step by step guidance1
Understand the concept of an installment note: An installment note is a type of loan where the borrower makes regular payments over time. Each payment typically includes both interest and principal portions.
Recognize the structure of payments: In an installment note, the total payment amount remains constant throughout the life of the loan, but the allocation between interest and principal changes over time.
Explain the interest calculation: Interest is calculated on the remaining principal balance. As the principal balance decreases with each payment, the interest portion of the payment also decreases.
Explain the principal allocation: Since the total payment remains constant and the interest portion decreases, the portion of the payment applied to the principal increases over time.
Summarize the correct statement: The portion of the payment applied to interest decreases, while the portion applied to principal increases as the note progresses.
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