Flipco signed a 10-year note payable on January 1, 2025, of \($800,000\). The note requires annual principal payments each December 31 of \($80,000\) plus interest at 5%.

The entry to record the annual payment on December 31, 2026, includes

a. a debit to Interest Expense for \($36,000\).

b. a debit to Interest Expense for \($40,000\).

c. a credit to Notes Payable for \($80,000\).

d. a credit to Cash of \($120,000\).