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Help Save & Exit Su Saved ter 10 Homework Check my w B Required information Exercise 10-6A Two accounting cycles for bonds issued at face value LO 10-3 of 2 [The following information applies to the questions displayed below Doyle Company issued $400,000 of 10-year, 8 percent bonds on January 1, Year 2. The bonds were issued at face value. Interest is payable in cash on December 31 of each year. Doyle immediately invested the proceeds from the bond issue In land. The land was leased for an annual $60,000 of cash revenue, which was collected on December 31 of each year, beginning December 31, Year 2 oped Exercise 10-6A Part a cok Required a. Organize the transaction data in accounts under the accounting equation for Year 2 and Year 3. (Enter any decreases to account balances with a minus sign. Not all cells in the "Accounts Titles for Retained Earnings" cplumn may require an input- leave cells blank if there is no corresponding input needed.) rint DOYLE COMPANY Effect of Events on the Accounting Equation Year 2 and Year 3 Stockholders Equity Retained Liabilities Accounts Titles for Retained Earnings Assets Event Bonds Payable Cash Land Earnings Year 2 1/1 4 1/1 12/31 12/31 of 10 Next 3 4 <Prev

Answer 1

a.					Effect of events on the accounting equation
	Event				Assets			=	Liabilities	+	Stockholder's equity	Account titles for retained earnings
					Cash	+	Land	=	Bonds payable	+	Retained earnings
	Year 2
	1/1.				400000				400000
	1/1.				-400000		400000
	12/31.	Lease rental			60000						60000	Rent revenue
	12/31.	Interest on bonds		(400000*8%)	-32000						-32000	Interest expense
	Bal.				28000		400000		400000		28000
	Year 3
	Beg. Bal.				28000		400000		400000		28000
	12/31.	Lease rental			60000						60000	Rent revenue
	12/31.	Interest on bonds		(400000*8%)	-32000						-32000	Interest expense
	End. Bal.				56000		400000		400000		56000
b.			Income statements
					Year 2	Year 3
	Rent revenue				60000	60000
	Less: Interest expense				32000	32000
	Net income				28000	28000
			Balance sheet
					Year 2	Year 3
	Assets
	Cash				28000	56000
	Land				400000	400000
	Total assets				428000	456000
	Liabilities
	Bonds payable				400000	400000
	Total liabilities				400000	400000
	Stockholder's equity
	Retained earnings				28000	56000
	Total stockholder's equity				28000	56000
	Total liabilities and stockholder's equity				428000	456000
			Statement of cash flows
					Year 2	Year 3
	Cash flows from operating activities:
	Net income				28000	28000
	Adjustments				0	0
	Net cash flow from operating activities       a				28000	28000
	Cash flows from investing activities:
	Purchase of land				-400000	0
	Net cash flows from investing activities     b				-400000	0
	Cash flows from financing activities:
	Issue of bonds				400000	0
	Net cash flows from financing activities      c				400000	0
	Net change in cash			a+b+c	28000	28000
	Add: Beginning balance of cash				0	28000
	Ending cash balance				28000	56000
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