On January 1,2011,Dew Drop Inn borrowed $80,000 at 8% interest.The loan will be repaid with equal annual installment payments of $8,900 made on the last day of each year,which is the companys yearend.Compared to the prior year's interest expense on this note,interest expense for the year ended December 31,2012 (2^{nd year)} is ________.

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The interest expense for the year ended December 31, 2012 will be less than the prior year's interest expense because the note payable balance at January 1, 2012 is less. Each year, a portion of the payment will go towards the principal balance of the loan, reducing it. Therefore, the interest expense will be calculated on a lower balance in the second year, resulting in a lower interest expense.

On January 1,2011,Dew Drop Inn Borrowed $80,000 at 8% Interest