John Young started a business by issuing a $90,000 face value note to First State Bank on January 1, 2013. The note had a 10 percent annual rate of interest and a five year term. Payments of $23,742 are to be made each December 31 for five years.
Required:
a. What portion of the December 31, 2013, payment is applied to
(1) Interest expense?
(2) Principal?
b. What is the principal balance on January 1, 2014?
c. What portion of the December 31, 2014, payment is applied to
(1) Interest expense?
(2) Principal?