Let's break this down into **three steps** with calculations and explanations after each step, as requested. --- ### **Step 1: Issue of Bonds (January 1, Year 1)** **Transaction:** Doyle Company issues $500,000 of 10-year, 7% bonds at face value. **Journal Entry:** - **Debit:** Cash $500,000 - **Credit:** Bonds Payable $500,000 **Explanation:** The company receives $500,000 in cash and records a liability for bonds payable of the same amount. --- ### **Step 2: Investment in Land (January 1, Year 1)** **Transaction:** The company invests the $500,000 cash from bonds into land. **Journal Entry:** - **Debit:** Land $500,000 - **Credit:** Cash $500,000 **Explanation:** The cash received from issuing bonds is used to purchase land, so cash decreases and land (an asset) increases. --- ### **Step 3: Year-End Transactions (December 31, Year 1 & Year 2)** #### **A. Lease Revenue (Collected cash for lease):** - Annual lease revenue: $125,000 (collected on December 31 each year) **Journal Entry (each year):** - **Debit:** Cash $125,000 - **Credit:** Lease Revenue $125,000 #### **B. Interest Payment on Bonds:** - Annual interest: $500,000 × 7% = $35,000 **Journal Entry (each year):** - **Debit:** Interest Expense $35,000 - **Credit:** Cash $35,000 **Explanation:** At year-end, the company receives lease revenue and pays interest on the bonds. --- ## **Final Answers: Journal Entries Summary** #### **Year 1:** 1. **Jan 1:** - Debit Cash $500,000 - Credit Bonds Payable $500,000 2. **Jan 1:** - Debit Land $500,000 - Credit Cash $500,000 3. **Dec 31:** - Debit Cash $125,000 - Credit Lease Revenue $125,000 4. **Dec 31:** - Debit Interest Expense $35,000 - Credit Cash $35,000 #### **Year 2 (Repeat for lease revenue and interest):** 1. **Dec 31:** - Debit Cash $125,000 - Credit Lease Revenue $125,000 2. **Dec 31:** - Debit Interest Expense $35,000 - Credit Cash $35,000 --- ## **T-Accounts Posting (for Year 1 & Year 2)** #### **Cash** | Year | Debit | Credit | |-------------|------------|------------| | Year 1 | 500,000 | 500,000 | | Year 1 | 125,000 | 35,000 | | Year 2 | 125,000 | 35,000 | #### **Land** | Year | Debit | Credit | |-------------|------------|------------| | Year 1 | 500,000 | | #### **Bonds Payable** | Year | Debit | Credit | |-------------|------------|------------| | Year 1 | | 500,000 | #### **Lease Revenue** | Year | Debit | Credit | |-------------|------------|------------| | Year 1 | | 125,000 | | Year 2 | | 125,000 | #### **Interest Expense** | Year | Debit | Credit | |-------------|------------|------------| | Year 1 | 35,000 | | | Year 2 | 35,000 | | --- **This completes the required journal entries and T-accounts for Year 1 and Year 2 as per the instructions!** If you need the closing entries or balances, let me know!

Certainly! Here is the step-by-step solution for part (A1), including full calculations, journal entries, and explanations: --- ### **Step 1: Record the Bond Issue (January 1, Year 1)** **Details:** - Bonds issued at face value of $500,000 - Bonds are 10-year, 7% bonds payable annually **Calculation:** - The bonds are issued at par value, so cash received = $500,000. **Journal Entry:** ```plaintext Debit: Cash $500,000 Credit: Bonds Payable $500,000 ``` **Explanation:** The company receives $500,000 in cash from issuing bonds, creating a liability (Bonds Payable) for the same amount. --- ### **Step 2: Use the Proceeds to Purchase Land (January 1, Year 1)** **Details:** - The entire proceeds from bond issuance are invested in land. **Calculation:** - Land purchased for $500,000. **Journal Entry:** ```plaintext Debit: Land $500,000 Credit: Cash $500,000 ``` **Explanation:** Cash decreases as it's used to purchase land, and land as an asset increases by the same amount. --- ### **Step 3: Record Lease Revenue and Interest Expense at Year-End (December 31, Year 1)** **Lease Revenue:** - Annual lease revenue collected = $125,000 **Interest Expense:** - Annual interest on bonds = 7% of $500,000 = $35,000 **Journal Entries:** - **Lease Revenue:** ```plaintext Debit: Cash $125,000 Credit: Lease Revenue $125,000 ``` - **Interest Expense:** ```plaintext Debit: Interest Expense $35,000 Credit: Cash $35,000 ``` **Explanation:** The company receives $125,000 in cash from leasing land and recognizes it as revenue. It also pays $35,000 interest on bonds, which is recorded as interest expense. --- ## **Final Summary:** | Date | Account | Debit | Credit | |--------------------------|--------------------------|----------------|--------------| | **Jan 1, Year 1** | Cash | $500,000 | | | | Bonds Payable | | $500,000 | | **Jan 1, Year 1** | Land | $500,000 | | | | Cash | | $500,000 | | **Dec 31, Year 1** | Cash | $125,000 | | | | Lease Revenue | | $125,000 | | **Dec 31, Year 1** | Interest Expense | $35,000 | | | | Cash | | $35,000 | --- This completes the journal entries for the bond issuance, land purchase, and end-of-year transactions for Year 1. If you need similar entries for Year 2 or further details, let me know!