The following transactions apply to Pecan Co. for Year 1, its first year of operations: Received $37,000 cash in exchange for issuance of common stock. Secured a $109,000 ten-year installment loan from State Bank. The interest rate is 5 percent and annual payments are $14,116. Purchased land for $20,000. Provided services for $85,000. Paid other operating expenses of $38,000. Paid the annual payment on the loan.

Required:

Organize the transaction data in accounts under an accounting equation.

Prepare an income statement and balance sheet for Year 1.

What is the interest expense for Year 2? Year 3?