On January 1, 2018, Brown Co. borrowed cash from First Bank by issuing a $42,000
ID: 2414103 • Letter: O
Question
On January 1, 2018, Brown Co. borrowed cash from First Bank by issuing a $42,000 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 $12,121 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 $22,260 cash per year.
Organize the information in accounts under an accounting equation. (Round your answers to the nearest whole dollar amount. Enter any decreases to account balances with a minus sign. Select "NA" if there is no effect on the "Accounts Titles / Retained Earnings".)
Explanation / Answer
Statement Showing Accounting Equation for Brown Co. S. No. Asset = Liabilities + Equity Date Items Cash = Note payable Revenue - Interest Expense 01/01/2018 Loan to Gemaine Paint Compnay $42,000 = $42,000 31/12/2018 Loan Repaid -$12,121 = -$9,601 $2,520 31/12/2019 Loan Repaid -$12,121 = -$10,177 $1,944 31/12/2020 Loan Repaid -$12,121 = -$10,788 $1,333 31/12/2021 Loan Repaid -$12,121 = -$11,434 $687 Total -$6,484 = $0 $6,484 Loan Amortization Schedule Year Opening Bal Cash Payment Interest Principal Ending Balance 2018 $42,000.00 $12,121.00 $2,520.00 $9,601.00 $32,399.00 2019 $32,399.00 $12,121.00 $1,943.94 $10,177.06 $22,221.94 2020 $22,221.94 $12,121.00 $1,333.32 $10,787.68 $11,434.26 2021 $11,434.26 $12,121.00 $686.06 $11,434.94 -$0.69