On January 1, Year 1, Brown Co. borrowed cash from First Bank by issuing a $64,500...

On January 1, Year 1, Brown Co. borrowed cash from First Bank by issuing a $64,500 face value, four-year term note that had an 9 percent annual interest rate. The note is to be repaid by making annual cash payments of $19,909 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 $34,185 cash per year.

c.Prepare an income statement, a balance sheet, and a statement of cash flows for each of the four years.

Complete this question by entering your answers in the tabs below.

Req C Inc Stmt
Req C Bal Sheet
Req C Stmt of Cash Flows

Prepare the income statement for each of the four years.

Solutions

Expert Solution

Particulars	Year 1	Year 2	Year 3	Year 4
Rental Income (A)	34,185	34,185	34,185	34,185
Interest Expense (B)	5,805	4,536	3,152	1,643
Profit (A-B)	28,380	29,649	31,033	32,542

Particulars	Year 1	Year 2	Year 3	Year 4
Reserve & Surplus	28,380	58,029	89,062	1,21,604
9% Long term Note	35,023	18,266	0	0
Installment due in 1 Year	15,373	16,757	18,266	0
Total	78,776	93,052	1,07,328	1,21,604
Land	64,500	64,500	64,500	64,500
Bank Balance	14,276	28,552	42,828	57,104
Total	78,776	93,052	1,07,328	1,21,604

Particulars	Year 1	Year 2	Year 3	Year 4
1. Cash Flow from Operating Activities
Net Profit for The Year	28,380	29,649	31,033	32,542
Finance Cost for Year	5,805	4,536	3,152	1,643
Net Cash flow from Operating Activities (A)	34,185	34,185	34,185	34,185
2. Cash Flow from Investing Activities
Purchase of Land	-64,500	0	0	0
Net Cash flow from Investing Activities (B)	-64,500	0	0	0
3. Cash Flow from Financing Activities
Proceeds from issuance of 9% Long term Note	64,500	0	0	0
Finance Cost for Year	-5,805	-4,536	-3,152	-1,643
Repayment of Long term Note	-14,104	-15,373	16,757	-18,266
Net Cash flow from Financing Activities (C)	44,591	-19,909	-19,909	-19,909
Net Cash Flow for the Year (A+B+C)	14,276	14,276	14,276	14,276
Opening Cash & Cash Equivalents	0	14,276	28,552	42,828
Closing Cash & Cash Equivalents	14,276	28,552	42,828	57,104

ekkarill92 answered 4 months ago

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