On January 1, Year 1, Brown Company borrowed cash from First Bank by issuing a $107,000 face-value, four-year term note that had an 6 percent annual interest rate. The note is to be repaid by making annual cash payments of $30,879 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 $59,000 cash per year. b. Prepare an income statement and balance sheetfor each of the four years. Rent revenue is collected in cash at the end of each year. (Hint: Record the transactions for each year in T-accounts before preparing the financial statements.)
On January 1, Year 1, Brown Company borrowed cash from First Bank by issuing a $107,000 face-value, four-year term note that had an 6 percent annual interest rate. The note is to be repaid by making annual cash payments of $30,879 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 $59,000 cash per year. b. Prepare an income statement and balance sheetfor each of the four years. Rent revenue is collected in cash at the end of each year. (Hint: Record the transactions for each year in T-accounts before preparing the financial statements.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:On January 1, Year 1, Brown Company borrowed cash from First Bank by issuing a $107,000 face-value, four-year term note that had an 6 percent annual interest rate. The
note is to be repaid by making annual cash payments of $30,879 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 $59,000 cash per year.
b. Prepare an income statement and balance sheetfor each of the four years. Rent revenue is collected in cash at the end of each year. (Hint: Record the transactions for each
year in T-accounts before preparing the financial statements.)
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