A partial amortization schedule for a five-year note payable that Mercury Co. issued on January 1, 2016, is shown here:

Required
a. What rate of interest is Mercury Co. paying on the note?
b. Using a financial statements model like the one shown below, record the appropriate amounts for the following two events:
(1) January 1, 2016, issue of the note payable.
(2) December 31, 2017, payment on the note payable.

c. If the company earned $75,000 cash revenue and paid $32,000 in cash expenses in addition to the interest in 2016, what is the amount of each of the following?
(1) Net income for 2016.
(2) Cash flow from operating activities for 2016.
(3) Cash flow from financing activities for 2016.
d. What is the amount of interest expense on this loan for 2018?

Transcribed Image Text:

Accounting Period Principal Balance January 1 Applied to Interest Cash Payment $13,858 13,858 Applied to Principal $10,858 11,401 2016 2017 $60,000 49,142 $3,000 2,457 Event No. AssetsLiab. EquityRe - -Exp. = Net Inc. Cash Flow