Final answer:
Installment notes' periodic payments usually consist of interest charges, portions that reduce the outstanding loan balance, and potentially installment fees. They do not include an increase in stockholders' equity.
Step-by-step explanation:
Periodic payments on installment notes typically include several components. These payments usually have:
- interest charges, which are payments made to the lender for the opportunity to use the borrowed funds
- a portion that reduces the outstanding loan balance, ensuring that the loan is gradually paid off over time
- and sometimes installment fees that cover the administrative costs associated with managing the installment plan.
However, they do not typically include an increase in stockholders' equity because this relates to the ownership interest in the company and is impacted by actions like issuing stock or retaining earnings, not by the repayment of debt.