A Corporation Borrowed Money from a Bank to Build a Building.The

question 21

Multiple Choice

A corporation borrowed money from a bank to build a building.The long-term note signed by the corporation is secured by a mortgage that pledges title to the building as security for the loan.The corporation is to pay the bank $80,000 each year for 10 years to repay the loan.Which of the following relationships can you expect to apply to the situation?

• A)The balance of mortgage payable at a given statement of financial position date will be reported as a non-current liability.
• B)The balance of mortgage payable will remain a constant amount over the 10-year period.
• C)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.
• D)The amount of interest expense will remain constant over the 10-year period.

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