Exercise 7-9A (Algo) Financial statement effects of an installment note LO 7.5 Dan Dayle started a business by issuing an $85,000 face value note to First State Bank on January 1, Year 1. The note had an 7 percent annual rate of interest and a five-year term. Payments of $20,731 are to be made each December 31 for five years, Required a. What portion of the December 31, Year 1 payment is applied to interest expense and principal? b. What is the principal balance on January 1 Year 2? c. What portion of the December 31. Year 2 payment is applied to interest expense and principal? (Round your answers to the nearest dollar amount.) a interest expense Principal b. Principal balance Interest expense Principal