A partial amortization schedule for a five-year note payable that Mercury Co. issued on January 1, Year

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

Applied to Interest Applied to Principal Accounting Period Year 1 Year 2 Principal Balance January 1 Cash Payment $13,85


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

Balance Sheet Income Statement Statement Event No. Assets = Llab. + Stk. Equlty Rev. - Exp. of Cash Flows = Net Inc. 1.


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

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
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Related Book For  book-img-for-question

Introductory Financial Accounting for Business

ISBN: 978-1260299441

1st edition

Authors: Thomas Edmonds, Christopher Edmonds

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