Question
A corporation borrowed money from a bank to build a Plant. The corporation is to pay the bank $100,000 each year for 10 years to
A corporation borrowed money from a bank to build a Plant. The corporation is to pay the bank $100,000 each year for 10 years to repay the loan. Which of the following relationships can you expect to apply to the situation if the corporation is using the effective rate of interest method?
The balance of mortgage payable will remain a constant amount over the 10-year period. | ||
The amount of interest expense will decrease each period the loan is outstanding, while the portion of the annual payment applied to the loan principal will increase each period. | ||
The amount of interest expense will remain constant over the 10-year period. | ||
The balance of mortgage payable at a given balance sheet date will be reported as a long-term liability. |
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