Question

Doyle Company issued $360,000 of 10-year, 8 percent bonds on January 1, Year 2. 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 $53,500 of cash revenue, which was collected on December 31 of each year, beginning December 31, Year 2.

Organize the transaction data in accounts under the accounting equation for Year 2 and Year 3.

Answer 1

The balance of the equation at end of year 2 is$388,800

The balance of the equation at end of year 3 is $417,600

Step-by-step explanation:

Assets =Liabilities +shareholders' equity

Land +cash Bonds payable retained earnings

1/1/year 2 $360,000 =$360,000

1/1/year 2 $360,000 ($360,000)

31/12/year2 $53,500 = $53,500

31/12/year2 ($28,800) = ($28,800)

Balance $388,800 = $388,800

Opening balance $388,800= $388,800

31/12/year3 $53,500= $53,500

31/12/year3 ($28,800)= ($28,800)

Balance $ 417,600 $417,600

The interest on bond=$360,000*8%=$28,800