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SVEN [57.7K]
3 years ago
13

A mortgage note payable with a fixed interest rate requires the borrower to make installment payments over the term of the loan.

Each installment payment includes interest on the unpaid balance of the loan and a payment on the principal. With each installment payment, indicate the effect on the portion allocated to interest expense and the portion allocated to principal.
Portion Allocated to Interest Expense Portion Allocated to Payment of Principal

a. Decreases, Increases
b. Increases, Increases
c. Increases, Decreases
d. Decreases, Decreases
Business
1 answer:
Aloiza [94]3 years ago
4 0

Answer: a. Decreases, Increases

Explanation:

With each installment paid, the interest expense goes down while the principal repayment goes up. This is because the amount of Principal reduces with every payment therefore the interest is charged on a lesser figure.

For example, assume $10,000 is to be paid per month on $100,000 mortgage with a 10% rate.

The first time the 10% is charged on $100,000 it will give $10,000 and since the payment is $10,000, all of it will be considered interest.

The second time the 10% is charged it will be charged on $90,000 (100,000 - first payment of $10,000) instead which will.mean interest payment is now only $9,000 (10% of $90,000). The difference of $1,000 ($10,000 payable every month and interest of $9,000) will be Principal repayment.

The third time around then, the amount left is $80,000. Interest payment will be $8,000 and Principal repayment becomes $2,000.

And so on and so forth.

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At the beginning of the year, accounts receivable were $146,000 and the allowance for bad debts was $11,700. During the year, sa
Julli [10]

Answer:

Ending balance Accounts Receivable $153,800 Ending balance Allowance for Bad Debts $14,300

Net Accounts Receivable at end of year $139,500

Explanation:

Calculation for the balances at the end of the year for both Accounts Receivable and Allowance for Bad Debts accounts

T ACCOUNT

ACCOUNT RECEIVABLE

DEBIT SIDE

Beginning balance $146,000

Sales on account $602,000

Total $748,000

Ending balance $153,800

($748,000-$594,200)

CREDIT SIDE

Cash collections $582,000

Bad Debts written off $12,200

Total $594,200

T ACCOUNT

ALLOWANCE FOR BAD DEBT

DEBIT SIDE

Bad Debts written off $12,200

Total $12,200

CREDIT SIDE

Beginning balance $11,700

Bad debts expense $14,800

Total $26,500

Ending balance $14,300

($26,500-$12,200)

Calculation for Net Accounts Receivable at end of year:

Net Accounts Receivable at end of year = ($153,800-$14,300)

Net Accounts Receivable at end of year=$139,500

Therefore the Ending balance for Accounts Receivable is $153,800 and Allowance for Bad Debts is $14,300 while the Net Accounts Receivable at end of year is $139,500

4 0
3 years ago
Which statement best describes the role of a credit agency?
tekilochka [14]

Answer:

The statement best describes the role of a credit agency is "It tracks the use of credit for lenders"

3 0
3 years ago
Which of the following does not affect the cost of automobile insurance
Scrat [10]
The color of your vehicle 
5 0
3 years ago
In personal selling, the relationship must continue for a long time, as the salesperson responds to new requests for information
Ierofanga [76]

Answer:

Presentation

Explanation:

There are six steps in making a successful sale. The first step is prospecting and Qualifying and the last one is following up on the sale.

Personal selling is the sale in which the seller makes a face to face presentation to the customer. Sales jobs range from the salespeople at the clothing stores to the engineers with MBA's who design complex systems for the manufacturers. The importance of personal selling is that it provides a detailed explanation of the product and the sales message can be varied as per the interests of the prospective customer. The size of the personal sales force can be varied as per the needs. In the above question, the salesperson responds to new requests of the customer, which is an important part of personal selling.

4 0
3 years ago
Using the allowance method of accounting for uncollectible receivables, the entry to reinstate a specific receivable previously
nasty-shy [4]

Answer:

D) Debit to Accounts Receivable

Explanation:

If you want to reinstate a specific receivable previously written off you need to do the opposite accounting entry at when the written off was made.

Previously was made a credit in the accounts receivable to deduct the amount of the bad debt, the opposite would be to make a debit in the Accounts receivable ot reflect the reinstanted value.

3 0
3 years ago
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