In each succeeding payment on an installment note:
A)The amount that goes to decreasing the carrying value of the note increases.
B)The amount that goes to decreasing the carrying value of the note decreases.
C)The amount that goes to decreasing the carrying value of the note is unchanged.
D)The amounts paid for both interest and principal increase proportionately.

Question

Quizplus · Accepted Answer

In an installment note, each succeeding payment goes towards decreasing the carrying value of the note, which means that the amount of principal being paid off increases with each payment. As the principal amount decreases, the interest charged on the remaining principal also decreases, resulting in a larger portion of the payment going towards decreasing the carrying value of the note. Therefore, the amount that goes towards decreasing the carrying value of the note increases with each succeeding payment.

In Each Succeeding Payment on an Installment Note