A partial amortization schedule for a 5-year note payable that Mabry Company issued on January 1, Year 1, is shown as follows.

Accounting Period	Principal Balance January 1	Cash Payment	Applied to Interest	Applied to Principal
Year 1	$106,000	$27,252	$9,540	$17,712
Year 2	88,288	27,252	7,946	19,306
Year 3	68,982	27,252	6,208	21,044

Required:

1. What rate of interest is Mabry Company paying on the note?
2. Using a financial statements model, record the appropriate amounts for the following two events:
   1. (1) January 1, Year 1, issue of the note payable.
   2. (2) December 31, Year 1, payment on the note payable.
3. If the company earned $86,100 cash revenue and paid $51,660 in cash expenses in addition to the interest in Year 1, what is the amount of each of the following?
   1. (1) Net income for Year 1.
   2. (2) Cash flow from operating activities for Year 1.
   3. (3) Cash flow from financing activities for Year 1.
4. What is the amount of interest expense on this loan for Year 4?

Rate of interest

%

MABRY COMPANY

Horizontal Statements Model

Event Number

Balance Sheet

Income Statement

Statement of Cash Flow

Assets

=

Liabilities

+

Stockholders' Equity

Revenue

Expenses

=

Net Income

1.

=

+

=

2.

(1) Net income for Year 1
(2) Cash flow from operating activities for Year 1
(3) Cash flow from financing activities for Year 1

Interest expense