Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below. On January 1, 2018, Brown Co. borrowed cash from First Bank by issuing a $76,500 face value, four-year term note that had an 8 percent annual interest rate. The note is to be repaid by making annual cash payments of $23,097 that include both interest and principal on December 31 of each year. Brown used the proceeds from the loan to purchase land that generated rental revenues of $41,310 cash per year. b. Organize the information in accounts under an accounting equation. (Round your answers to the nearest whole dollar amount. Enter any decreases to account balances with a minus sign. Select "NA" if there is no effect on the "Accounts Titles/ Retained Earnings".)

Explanation / Answer

Long-term note amortisation table Year Beginning liabilty Intrest @ 8% on beg. Liability Total payment Principal (Total payment -interest) Ending liability (Beg. Liability- principal) 2018 76500 6120 23097 16977 59523 2019 59523 4762 23097 18335 41188 2020 41188 3295 23097 19802 21386 2021 21386 1711 23097 21386 0 b. Assets = Liabilities + Stockholder's equity Account titles/ retained earnings Event Cash + Land Note Payable Retained earnings 2018 01-Jan 76500 76500 01-Jan -76500 76500 Dec-31 41310 41310 Rent revenue Dec-31 -23097 -16977 -6120 Interest expense Bal. 18213 76500 59523 35190 2019 Beg Bal. 18213 76500 59523 35190 Dec-31 41310 41310 Rent revenue Dec-31 -23097 -18335 -4762 Interest expense End.bal. 36426 76500 41188 71738 2020 Beg Bal. 36426 76500 41188 71738 Dec-31 41310 41310 Rent revenue Dec-31 -23097 -19802 -3295 Interest expense End.bal. 54639 76500 21386 109753 2021 Beg Bal. 54639 76500 21386 109753 Dec-31 41310 41310 Rent revenue Dec-31 -23097 -21386 -1711 Interest expense End.bal. 72852 76500 0 149352 c. Income statement 2018 2019 2020 2021 Interest expense -6120 -4762 -3295 -1711 Rent revenue 41310 41310 41310 41310 Net income 35190 36548 38015 39599 d. Balance sheet 2018 2019 2020 2021 Assets Cash 18213 36426 54639 72852 Land 76500 76500 76500 76500 Total assets 94713 112926 131139 149352 Liabilities Notes payable 59523 41188 21386 0 Total liabilities 59523 41188 21386 0 Stockholder's equity Retained earnings 35190 71738 109753 149352 Total stockholder's equity 35190 71738 109753 149352 Total liabilities and stockholder's equity 94713 112926 131139 149352 e. Statement of cashflows 2018 2019 2020 2021 Cashflows from operating activities: Net income 35190 36548 38015 39599 Add: depreciation 0 0 0 0 Chane in current assets and liabilities 0 0 0 0 Net cashflows from operating activities 35190 36548 38015 39599 Cashflows from investing activities: Purchase of land -76500 0 0 0 Net cashflows from investing activities -76500 0 0 0 Cashflows from financing activities: Long term note issued 76500 0 0 0 Repayment of note -16977 -18335 -19802 -21386 Net cashflows from financing activities 59523 -18335 -19802 -21386 Net change in cash 18213 18213 18213 18213 Add: Beginning balance of cash 0 18213 36426 54639 Ending balance of cash 18213 36426 54639 72852

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