The following transactions apply to Pecan Co. for Year 1, its first year of operations:

1. Received $39,000 cash in exchange for issuance of common stock.
2. Secured a $100,000 ten-year installment loan from State Bank. The interest rate is 5 percent and annual payments are $12,950.
3. Purchased land for $21,000.
4. Provided services for $100,000.
5. Paid other operating expenses of $43,000.
6. Paid the annual payment on the loan.

Required

1. Organize the transaction data in accounts under an accounting equation.
2. Prepare an income statement and balance sheet for Year 1.
3. What is the interest expense for Year 2? Year 3?

a.

Organize the transaction data in accounts under an accounting equation. (Enter any decreases to account balances with a minus sign. If there is no effect on the Account Titles for Retained Earnings, leave the cell blank. Not all cells will require entry.)

PECAN COMPANY
Effect of Events on the Accounting Equation
Event No.	Assets			=	Liabilities	+	Stockholders' Equity			Account Titles for Retained Earnings
	Cash	+	Land	=	Note Payable	+	Common Stock	+	Retained Earnings
Year 1
1.		+		=		+		+
2.		+		=		+		+
3.		+		=		+		+
4.		+		=		+		+
5.		+		=		+		+
6.		+		=		+		+
Bal.		+		=		+		+

b1.

Prepare an income statement for Year 1.

PECAN COMPANY
Income Statement
For the Year Ended December 31, Year 1
Non-operating items:

b2.

Prepare a balance sheet for Year 1.

PECAN COMPANY
Balance Sheet
As of December 31, Year 1
Assets
Total assets
Liabilities
Total liabilities
Stockholders' Equity
Total stockholders' equity
Total liabilities and stockholders' equity

c.

What is the interest expense for Year 2? Year 3? (Round your answers to the nearest whole dollar amount.)

	Year 2	Year 3
Interest expense