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12 August, 20:28

Dan Dayle started a business by issuing an $80,000 face value note to First State Bank on January 1, 2018. The note had an 8 percent annual rate of interest and a five-year term. Payments of $20,037 are to be made each December 31 for five years. Required What portion of the December 31, 2018, payment is applied to interest expense and principal

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  1. 12 August, 23:42
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    Answer a.

    Principal Balance, Jan. 1, 2018 = $80,000

    Interest Expense = $80,000 * 8%

    Interest Expense = $6,400

    Annual Payment = $20,037

    Principal Repaid = $20,037 - $6,400

    Principal Repaid = $13,637

    Answer b.

    Principal Balance, Jan. 1, 2019 = Principal Balance, Jan. 1, 2018 - Principal Repaid

    Principal Balance, Jan. 1, 2019 = $80,000 - $13,637

    Principal Balance, Jan. 1, 2019 = $66,363

    Answer c.

    Principal Balance, Jan. 1, 2019 = $66,363

    Interest Expense = $66,363 * 8%

    Interest Expense = $5,309

    Annual Payment = $20,037

    Principal Repaid = $20,037 - $5,309

    Principal Repaid = $14,725
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