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".)

Answer 1

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