Dan Dayle started a business by issuing an $80,000 face value note to First State Bank on January 1, Year 1. 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. Round answers to nearest whole dollar.

Required

a. What portion of the December 31, Year 1, payment is applied to

(1) Interest expense?

(2) 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

(1) Interest expense?

(2) Principal?