On January 1,2011,Zenith,Inc.,signed a $200,000,5%,20-year mortgage note to buy a new office building.The mortgage will be repaid in a series of twenty equal annual installment payments.Over the 20-year period,as each installment payment is made,the amount that Zenith,Inc.,will show on its balance sheet for mortgage payable will ________.
A)increase
B)decrease
C)stay the same
D)The answer cannot be determined from the information given.

Question

Quizplus · Accepted Answer

As each installment payment is made, the mortgage payable will decrease by the same amount. Therefore, over the 20-year period, the mortgage payable will decrease and not increase or stay the same.