A partial amortization schedule for a note payable with interest paid annually that was issued on January 1, Year 1, is shown next:

Accounting Period	Principal balance January 1	Cash Payment	Applied to Interest	Applied to Principal
Year 1	$ 414,000	$ 53,500	$ 16,560	$ 36,940

Required:

1. What is the annual rate of interest charged on this loan?
2. Using the horizontal financial statements model, record the appropriate amounts for the following two events:
   1. (1) January 1, Year 1, issue of the note payable.
   2. (2) December 31, Year 1, payment on the note payable.