Doyle Company issued $390,000 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 $52,500 of cash revenue, which was collected on December 31 of each year, beginning December 31, Year 2.
Required:
1. Prepare the income statement, balance sheet, and statement of cash flows for Year 2 and Year 3. (Amounts to be deducted and net loss amount should be indicated with minus sign.)

issued $390,000 of 10 year 8% bonds at face value

journal entry

Dr Cash 390,000

    Cr Bonds payable 390,000

purchased land that it rents

journal entry

Dr Land 390,000

    Cr Cash 390,000

journal entry to record interest payments

Dr Interest expense 31,200

    Cr Cash 31,200

journal entry to record collection of lease

Dr Cash 52,500

    Cr lease revenue 52,500

Doyle Company

Income statement for years 2 and 3 (they are the same for both)

Total revenue            $52,500

- Expenses                ($31,200)

Net income               $20,400

Doyle Company

Balance Sheet

December 31, Year 2

Assets:

Cash $20,400

Land $390,000

total = $410,400

Liabilities and Equity:

Bonds payable $390,000

Retained earnings $20,400

total = $410,400

Doyle Company

Balance Sheet

December 31, Year 3

Assets:

Cash $40,800

Land $390,000

total = $430,800

Liabilities and Equity:

Bonds payable $390,000

Retained earnings $40,800

total = $430,800

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