A partial amortization schedule for a five-year note payable that Puro Co. issued on January 1, 2010, is shown here:

Required
a. What rate of interest is Puro 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, 2010, issue of the note payable.
(2) December 31, 2010, payment on the note payable.

c. If the company earned $75,000 cash revenue and paid $35,000 in cash expenses in addition to the interest in 2010, what is the amount of each of the following?
(1) Net income for 2010.
(2) Cash flow from operating activities for 2010.
(3) Cash flow from financing activities for 2010.
d. What is the amount of interest expense on this loan for2012?

Transcribed Image Text:

Principal Accounting Period Cash Applied to Interest Applied to Principal Balance Janury1 Payment S25,046 25,046 $100,000 82,954 2010 2011 $8,000 6,636 S17,046 18,410 Event No. Assets = Liab. + Equity Rev. - Exp. Net Inc. Cash Flow