Answer the following statements true (T) or false (F)

Question

1) The current portion of notes payable is the principal amount that will be paid within two years of the
balance sheet date, and the remaining portion is long term.
2) The current portion of notes payable is reported on the balance sheet under current liabilities.
3) The issuance of a note is recorded, on the books of the borrower, by crediting Cash and debiting Notes
Receivable.
4) When preparing an amortization schedule, the interest expense increases each year because the
principal decreases with each installment payment.
5) On March 1, 2018, Vintage Services issued an 8% long-term notes payable for $22,000. It is payable over
a 16-year term in $1,375 principal installments on March 1 of each year, beginning March 1, 2019. Each
yearly installment will include both principal repayment of $1,375 and interest payment for the preceding
one-year period. The journal entry to pay the first installment will include a debit to Interest Expense for
$1,760.

Answer 1

1. FALSE
2. TRUE
3. FALSE
4. FALSE - Explanation: When preparing an amortization schedule, the interest expense decreases each year because the principal decreases with each installment payment.
5. TRUE