Question

Doyle Company issued $310,000 of 10-year, 9 percent bonds on January 1, Year 2. The bonds were issued at face value. Interest is payable in cash on December 31of each year. Doyle immedíately invested the proceeds from the bond issue in land. The land was leased for an annual $55,000 of cash revenue, which was collected on December 31 of each year, beginning December 31, Year 2.

Answer 1

Please find the answer below:

Doyle Company
Effect of Events on the Accounting Equation
Year2 and Year 3
Events	Assets		Liabilities	Stockholders' Equity
	Cash	Land	Bonds Payable	Retained Earnings
Year 2
01-Jan	310000		310000		Bond issued
01-Jan	-310000	310000			Amount invested in Land
Dec-31	55000				Lease revenue
Dec-31	-27900			27100	Interest expense
Bal.	27100	310000	310000	27100
Year 2
Beg. Bal.	27100	310000	310000	27100
Dec-31	55000				Lease revenue
Dec-31	-27900			27100	Interest expense
End. Bal.	54200	310000	310000	54200
Income Statement
For the Tear Ended Dec. 31
			Year 2	Year 3
Lease Revenue			55000	55000
Interest Expense			-27900	-27900
Net Income			27100	27100
Balance Sheet
As of Dec. 31
			Year 2	Year 3
Assets
Cash			27100	54200
Land			310000	310000
Total Assets			337100	364200
Liabilities
Bond Payable			310000	310000
Total Liabilities			310000	310000
Stockholders' Equity
Retained Earnings			27100	54200
Total Stockholders' Equity			27100	54200
Total Liabilities and Stockholders' Equity			337100	364200
Statement of Cash Flows
For the Tear Ended Dec. 31
			Year 2	Year 3
Cash flows from operating activities
Net Income			27100	27100
Net Cash flows from operating activities			27100	27100
Cash flows from investing activities
Land purchased			-310000	0
Net Cash flows from investing activities			-310000	0
Cash flows from financing activities
Bond issued			310000	0
Net Cash flows from financing activities			310000	0
Change in Cash			27100	27100
Cash Beg. Bal.			0	27100
Cash End. Bal.			27100	54200