Exercise 7-7A (Algo) Effect of warranty obligations and payments on financial statements LO 7.4 The Chair Company provides a 120-day parts-and-labor warranty on all merchandise it sells. The Chair Company estimates the warranty expense for the current period to be $1,150. During the period a customer returned a product that cost $863 to repair. Required a. Show the effects of these transactions on the financial statements using a horizontal statements model like the example shown here. Use a + to indicate increase or a - for decrease. if the element is not affected, leave the cell blank. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). (Not all cells will require entry.) Exercise 7-9A (Algo) Financial statement effects of an installment note LO 7.5 Dan Dayle started a business by issuing an $81,000 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 $19,755 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.)