Question

Doyle Company issued $390,000 of 10-year, 9 percent bonds on January 1, 2018. 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 $56,500 of cash revenue, which was collected on December 31 of each year, beginning December 31, 2018.

A) Prepare the income statement, balance sheet, and statement of cash flows for 2018 and 2019.

Answer 1

Income statement of Doyle Company for the year ended 31st December,2018

Particulars	Amount	Particulars	Amount
Interest Exp.	$    35,100.00	Lease income	$    56,500.00
Net Profit	$    21,400.00
	$    56,500.00		$    56,500.00

Balancesheet of Doyle Compay as on 31st December,2018

Liabilities	Amount	Assets	Amount
10-year 9% Bond	$ 390,000.00	Land	$ 390,000.00
Net Profit	$    21,400.00	Cash	$    21,400.00
	$ 411,400.00		$ 411,400.00

Statement of Cash Flow for Doyle Company for the year ended 31st December,2018

Cash flow from Operating Activities	$      56,500.00
Lease revenue	$      56,500.00
Cash flow from Investing Activities	$ (390,000.00)
Land	$ (390,000.00)
Cash flow from Financing Activities	$    354,900.00
10-year 9% Bond	$    390,000.00
Interest exp.	$    (35,100.00)
Net increase in cash	$      21,400.00
Cash at the beginning of the year	$                     -
Cash at the end of the year	$      21,400.00

Income statement of Doyle Company for the year ended 31st December,2019

Particulars	Amount	Particulars	Amount
Interest Exp.	$    35,100.00	Lease income	$    56,500.00
Net Profit	$    21,400.00
	$    56,500.00		$    56,500.00

Balancesheet of Doyle Compay as on 31st December,2019

Liabilities	Amount	Assets	Amount
10-year 9% Bond	$ 390,000.00	Land	$ 390,000.00
Reserve & Surplus	$    21,400.00	Cash	$    42,800.00
Net Profit 2019	$    21,400.00
	$ 432,800.00		$ 432,800.00

Statement of Cash Flow for Doyle Company for the year ended 31st December,2019

Cash flow from Operating Activities	$      56,500.00
Lease revenue	$      56,500.00
Cash flow from Investing Activities	$ (390,000.00)
Land	$ (390,000.00)
Cash flow from Financing Activities	$    354,900.00
10-year 9% Bond	$    390,000.00
Interest exp.	$    (35,100.00)
Net increase in cash	$      21,400.00
Cash at the beginning of the year	$      21,400.00
Cash at the end of the year	$      42,800.00