FINANCIAL ACCOUNTING REVIEW
Liabilities
Problem 1
Canada Company’s accounts payable at December 31, 2016 totaled Php2,000,000 before any
necessary year-end adjustments relating to the following transactions:
a.
On December 27, 2016, Canada wrote and issued checks to creditors totaling
Php700,000. The issuance of the checks was recorded on January 3, 2017.
b.
On December 28, 2016, Canada purchased and received goods for Php300,000, terms
2/10, n/30. Canada records purchases and accounts payable at net amounts. The
invoice was recorded and paid January 3, 2017.
c.
Goods shipped FOB destination on December 20, 2016 from a vendor to Canada were
received January 2, 2017. The invoice cost was Php130,000. The purchase was
recorded on January 2, 2017.
d.
Goods costing Php240,000 were purchased from New York Company. The goods were
shipped by New York Company on December 28, 2016, FOB destination. The goods,
together with the invoice, were received by Canada on January 4, 2017.
Required: What amount should Canada Company report as total amounts payable at December
31, 2016?
Accounts Payable, 12/31/12, before adjustments
Unrecorded checks in payment to creditors
Unrecorded purchases (300,000 x 98%)
Accounts Payable, 12/31/12, as adjusted
Php
Php
2,000,000
( 700,000)
294,000
1,594,000
Problem 2
The balance in Mari Company’s account payable at December 31, 2016 was Php3,000,000
before considering the following information:
a.
Goods shipped FOB shipping point on December 30, 2016 from a vendor to Mari
Company were lost in transit. Mari Company did not record the invoice cost of
Php480,000. On January 6, 2017, Mari Company filed a Php480,000 claim
against the common carrier.
b.
On December 27, 2016, a vendor authorized Mari Company to return, for full
credit goods shipped and billed at Php160,000 on December 2, 2016. Mari
Company shipped the returned goods on December 27, 2016. A credit memo for
Php160,000 was received and recorded by Mari Company on January 6, 2017.
Required: What amount should Mari Company report as total accounts payable at December
31, 2016?
Accounts Payable, 12/31/16, before adjustments Php
Goods purchased FOB shipping point, lost in transit
Returned to supplier
Accounts Payable, 12/31/16, as adjusted
Php
3,000,000
480,000
( 160,000)
3,320,000
Problem 3
On October 1, 2016, Mabuhay Company purchased two new company automobiles from Toyota
Motors Corporation. The terms of the sale called for Mabuhay to pay Php3,494,400 on October
1, 2017. Mabuhay gave the seller a non-interest bearing note for this amount. At the date of
purchase, the interest rate for short-term loans of this type was 12%.
Required:
1.
2.
Give the journal entries on October 1, 2016, December 31, 2016 and October 1, 2017.
Show how the notes payable would be presented in the December 31, 2016 statement
of financial position of Mabuhay Corporation.
10/01/16
Automobiles (3,494,400 ÷ 112%)
Discount on Notes Payable
Notes Payable
3,120,000
374,400
3,494,400
12/31/16
10/01/17
Interest Expense
Discount on Notes Payable
3,120,000 x 12% x 3/12
93,600
Interest Expense
Discount on Notes Payable
374,400 – 93,600
280,800
Notes Payable
3,494,400
93,600
280,800
Cash
(b)
3,494,400
At December 31, 2016:
Current Liabilities:
Notes Payable, net of P280,800 Discount
Php
3,213,600
Problem 4
On June 1, 2016, Mari Company discounted its own Php2,400,000 non-interest bearing note
with Kapamilya Bank at 10%. The note is due on May 31, 2017.
Required:
1. Give the journal entries on June 1, 2016, December 31, 2016 and May 31, 2017.
2. Determine the carrying value of the liability as of December 31, 2016.
06/01/16
12/31/16
05/31/117
Cash
2,160,000
Discount on Notes Payable
240,000
Notes Payable
(2,400,000 x 10% x 12/12)
2,400,000
Interest Expense
140,000
Discount on Notes Payable
240,000 x 7/12=140,000
140,000
Interest Expense
100,000
Discount on Notes Payable
(240,000 – 140,000= 100,000)
100,000
Notes Payable
Cash
2,400,000
At December 31, 2016:
Current Liabilities:
Notes Payable, net of P100,000 Discount
2,400,000
Php
2,300,000
Problem 5
In August 2016, Mari Company became involved in lawsuit. As a result of this litigation, it is
probable that Mari Company will have to pay an amount ranging from Php1,400,000 to
Php2,000,000 but Php1,600,000 is considered to be the best estimate of the obligation.
In September 2016, a competitor commenced a suit against Mari Company alleging violation of
antitrust laws seeking damages of Php2,200,000. Mari Company denies the allegations, and the
likelihood of Mari Company paying any damages is remote.
In October 2016, Pampanga City Government brought action against Mari Company for
Php3,800,000 for polluting Pampanga river. It is reasonably possible that Pampanga
government will be successful, but the amount of damages Mari Company will have to pay is
not reasonably determinable.
Required: What amount if any, should be accrued by a charge to revenue in 2016?
Amount to be accrued on 12/31/16 (the best estimate of the obligation) P1,600,000
No obligation is recognized for the suit filed in September 2016 nor for the suit filed
in October. However, disclosure is necessary in the notes to the financial statements
for the suit filed in October 2016 by Pampanga City government since it is reasonably
possible the Pasig City government will be successful.
Problem 6
Camil Company embarked on a promotional program whereby a “T” shirt costing Php150 each
is given away for every 100 bottle crowns returned plus Php50. Camil Company estimates that
40% of the bottle crowns in the hands of consumers will be presented for redemption. The
following information is available to you:
Quantity
Amount
Bottles sold
2,000,000
Php 10,000,000
“T” shirts bought for give away
3,000
450,000
“T” shirts distributed to customers
2,000
Required:
Prepare journal entries to record the following:
1. Purchase of premiums
2. Redemptions of premiums
3. Year-end adjustment to establish estimated liability for outstanding premiums.
a.
b.
c.
Premium Inventory
Cash / Accounts Payable
450,000
Premium Expense (2,000 x P100)
Cash (2,000 x 50)
Premium Inventory (2,000 x 150)
200,000
100,000
450,000
300,000
Premium Expense
600,000
Estimated Liability for Premium
Claims Outstanding
600,000
(40% x 2,000,000)/ 100 = 8,000
8,000 – 2,000 = 6,000; 6,000 x (150 – 50) = 600,000
Problem 7
During the year 2016, Pau Company started a promotional campaign for the sale of its car wax
product. A coupon is attached for each unit of car wax sold. For every five coupons plus
Php50, a customer can avail of a bottle of tire black. Each tire black costs the company Php120.
The following information relates to the sale of car wax and coupons redeemed and expected
to be redeemed in the future.
2015
2016
Sale of car wax
280,000 units
400,000 units
Coupons redeemed
80,000
180,000
Coupons expected to be
redeemed in the future
(year-end estimates)
60,000
160,000
Required:
Compute the following:
1. Premium expense for 2015 and 2016.
2. Provision for premium claims outstanding at December 31, 2015 and December 31,
2016.
2015
2016
Expected future redemption, beg
(60,000)
Redeemed during the year
80,000
180,000
Expected future redemption, end
60,000
160,000
------------------------------------------Total
140,000
280,000
÷5
`÷5
---------------------------------------------28,000
56,000
Net cost of premium (120 – 50)
x P70
x P70
----------------------------------------------Premium expense
P1,960,000
P 3,920,000
===========================
Provision for premium claims outstanding
12/31/16 (60,000/5) x P70
12/31/16 (160,000/5) x P70
Php 840,000
Php2,240,000
Problem 8
On January 1, 2016, Camil Company introduced a new line of product that carries a three-year
warranty against factory defects. Estimated warranty costs related to peso sales are as follows:
15 of sales in the year of sale, 2% of sales in the year after sale, and 3% of sales in the second
year after sales.
Sales and warranty expenditures for the period 2016 to 2018 were as follows:
Sales
Actual warranty
expenditures
Php
2016
2,000,000
Php
2017
5,000,000
16,000
Php
2018
7,000,000
76,000
225,000
Required:
Prepare journal entries to record the foregoing for years 2016 to 2018. The company’s
accounting period is the calendar year.
2016
2017
2018
Sale of product
Accts. Receivable/Cash 2,000,000
Sales
2,000,000
Accrual of repairs
Warranty Expense
120,000
Warranty Liability
120,000
6% x 2M = 120,000
6% x 5M = 300,000
6% x 7M = 420,000
Actual repairs
Warranty Liability
Cash/ AP, etc.
16,000
5,000,000
5,000,000
7,000,000
7,000,000
300,000
420,000
300,000
76,000
16,000
420,000
225,000
76,000
225,000
Problem 9
Pau Company started selling a new product that carried a two-year warranty against defects.
Based upon past experience with other products, the estimated warranty costs related to peso
sales are computed as follows:
First year of warranty
3%
Second year of warranty
5%
Total sales and actual warranty repairs for 2016 and 2017 are given below:
Sales
Php
Actual warranty payt
2016
8,400,000
297,600
Php
2017
13,920,000
360,000
Required:
1.
What amount should Pau report as its estimated warranty liability as of December 31,
2017?
2.
Based on the above data, assuming that sales and repairs occur evenly throughout the
year, how much would be the predicted warranty expense covering 2016 and 2017 sales
still under warranty at December 31, 2017?
(1)
Warranty Liability, January 1
Warranty expense (8% x 8,400,000)/(8% x 13,920,000)
Actual repair costs incurred
Warranty liability, December 31
(2)
On 2016 sales (8,400,000 x 5% x ½)
On 2017 sales [(1/2 of 3%) + 5%] x 13,920,000
2016
2017
0
P 374,400
672,000
1,113,600
( 297,600) ( 360,000)
-----------------------------------------P
374,400 P 1,128,000
========================
P
P 210,000
904,800
----------------P 1,114,800
==========
Warranty Liability, December 31, 2017, as analyzed
Problem 10
Doremi Company pays its general manager an annual bonus. For the year 2016, the company
reported profit of Php16,000,000 before deductions for bonus and corporate income taxes. The
corporate income tax is 30%.
Required: Determine the amount of bonus under each of the following assumptions:
1.
2.
3.
4.
Bonus is 8% of profit before deduction for both bonus and income taxes.
Bonus is 8% of profit after deduction for bonus but before deduction for income
taxes.
Bonus is 8% of profit before deduction for bonus but after deduction for income
taxes.
Bonus is 8% of profit after deduction for both bonus and income taxes.
Problem 11
Angel Corporation pays bonuses to its sales manager and two sales agents. The company had
profit for 2016 of Php6,000,000 before bonuses and income taxes. Assume1.
2.
3.
The sales manager gets 8% and each sales agent gets 6% of profit before tax
and bonuses.
Each bonus is 12% of profit after income tax and bonuses.
Sales manager gets 12% and each sales agent gets 10% of profit after bonuses
but before income tax.
Required:
Determine the amount of bonus for the sales manager and for each sales agent under the given
independent assumptions. Assume a tax rate of 30%.
a.
Bonus to sales manager = .08 x 6,000,000 = 480,000
Bonus to each sales agent = .06 x 6,000,000 = 360,000
b.
Total Bonus = .36 {6,000,000 – B – T )
T = .30 {6,000,000 – B }
B = .36 {6,000,000 – B - .30 (6,000,000 – B)}
B = .36 {6,000,000 – B –1,800,000 + .30B}
B = 1,512,000 - .252B
B = 1,512,000/1.252 = 1,207,667 (total)
B (Each): 1,207,667/ 3 = 402,556
c.
B = .32 {6,000,000 – B }
B = 1,920,000 - .32B
B = 1,920,000/1.32 = 1,454,545 (total)
B (Sales Manager):1,454,545 x 12/32 = 545,454
B (Each Sales Agent): 1,454,545x 10/32 = 454,545
Problem 12
Camil publication sells magazine subscriptions for one to three-year periods. Information
relating to sales and expiration are as follow:
Subscription Sold
Expiring in
2015
2016
2017
2018
2019
2020
2015
10,000,000
2,000,000
5,600,000
2,400,000
2016
9,000,000
2,400,000
4,000,000
2,600,000
2017
11,000,000
3,600,000
4,800,000
2,600,000
2018
14,000,000
4,000,000
5,600,000
4,400,000
Required:
1.
2.
3.
What is the balance of Unearned Subscriptions Revenue at January 1, 2017?
Prepare entries to record the receipt of the subscriptions and the revenue from
magazine subscriptions for years 2017 and 2018.
What is the balance of the Unearned Subscriptions Revenue at December 31,
2017 and at December 31, 2018?
Problem 13
At December 31, 2016, Pau Company owed notes payable of Php4,000,000 with a maturity of
April 30, 2017. These notes did not rise from transactions in the normal course of business. On
February 1, 2017, Pau Company issued Php8,000,000 of ten-year bonds with the intention of
using part of the bond proceeds to liquidate the Php4,000,000 of notes payable. Pau
Company’s December 31, 2016 financial statements were issued on march 29, 2017.
Required:
How much of the Php4,000,000 notes payable should be classified as current liabilities in pau
Company’s statement of financial position at December 31, 2016?
The full amount of P4,000,000 is classified as current liability because on December 31, 2016
(the reporting date), the enterprise has no unconditional right to defer the settlement of the
obligation for a period of at least 12 months.
Problem 14
For each of the following cases, determine the amount of the notes payable reported as current
and non current at December 31, 2016.
Case 1. Pau Company has Php3 million of notes payable due June 15, 2017. At December 31,
2016, Pau Company signed an agreement to borrow up to Php 3 million to refinance the notes
payable on a long-term basis. The refinancing agreement called for borrowings not to exceed
80% of the value of the collateral Pau Company was providing. At the date of issue of the
December 31, 2016 financial statements, the value of the collateral was Php3.6 million and was
not expected to fall below this amount.
Case 2. Pau Company has Php 2 million of notes payable due June 15, 2017. At February 15,
2017, Pau Company signed an agreement to borrow up to php 2 million to refinance the notes
payable on a long term basis. The refinancing agreement called for borrowings not to exceed
80% of the value of the collateral Pau Company was providing. The value of the collateral was
Php 2.4 million and was not expected to fall below this amount. The financial statements are
authorized for issuance on March 5, 2017.
Current
Case 1 .
3,600,000 x 80%
3,000,000 – 2,880,000
Case 2
Non-current
P
P
2,880,000
120 ,000
2,000,000
0
Problem 15
Included in Joyce Company’s liability account balance at December 31, 2016 were the
following:
14% note payable issued, October 1, 2011, maturing September 30, 2017,
Php5,000,000
16% note payable issued October 1,2016 payable in six equal semi-annual installments
of Php1,600,000 every April 1 and October 1, beginning April 1, 2017, Php9,600,000.
Pau Company’s December 31, 2016 financial statements were issued on March 31, 2017. On
March 10, 2017, Pau Company consummated a non-cancelable agreement with the lender to
refinance the 14% Php5,000,000 note on a long term basis, on readily determinable terms that
have not yet been implemented.
Required:
On the December 31, 2016 statement of financial position, what amount of the notes payable
should Pau Company classify as current liabilities? (Disregard any amount of accrued interest
as of December 31, 2016)
Current Liabilities
14% Notes Payable, refinanced on March 10, 2017
Current portion of 16% notes payable
Total current liabilities
P
5,000,000
1,600,000
-------------------------P
6,600,000
==============
Problem 16
On July 1, 2016, Mari Corporation issued Php5,000,000 of its 10% 7-year bonds with
detachable share warrants at Php108. Each Php1,000 bond carried a detachable share warrant
for the purchase of 2 shares of Php100 par value ordinary shares at Php140 per share. The
market value of the bonds ex-warrants is 102.
Required:
1.
Prepare journal entries to record the issuance of bonds with detachable warrants.
2.
Prepare journal entry to record the exercise of warrants assuming that all of the
warrants were exercised.
Issue price of bonds and warrants 5,000,000 x 1.08
MV of bonds without warrants 5,000,000 x 1.02
Php
5,400,000
5,100,000
-----------------------Php
300,000
==============
Value assigned to warrants
(1)
Cash
5,400,000
Premium on Bonds Payable
Bonds Payable
Share Warrants Outstanding
(b)
100,000
5,000,000
300,000
Cash (5,000 x 2 x 140)
1,400,000
Share Warrants Outstanding
300,000
Ordinary Shares (5,000 x 2 x 100)
Share Premium
1,000,000
700,000
Problem 17
On March 1, 2016, OneDirec issued Php1,000,000 of its 10% non-convertible bond at 103, due
February 28, 2026. Each Php1,000 bond was issued with 30 non-detachable share warrants,
each of which entitles the holder to purchase for Php50, one ordinary share of Onedirec, par
value Php25. If sold without the warrants, the bond would yield 12%. The interest on the bonds
is payable annually.
1.
2.
3.
4.
Determine the amount assigned to the bonds and to the warrants on March 1, 2016.
Compute the interest expense for 2016.
Compute the carrying value of the bonds on December 31, 2016.
Journalize the exercise of the warrants assuming that all warrants were exercised on
June 30, 2107.
(1)
Issue price of bonds with warrants (1,000,000 x 1.03)
Bond price without warrants
1,000,000 x 0.3220
322,000
100,000 x 5.6502
565,020
-----------
1,030,000
Value of share warrants
142,980
========
(2)
Interest Expense for 2016 (887,020 x 12% x 10/12
(3)
Bond carrying value, March 1, 2016
Amortization through December 31, 2016
887,020 x 12% x 10/12
1,000,000 x 12% x 10/12
Bond carrying value, December 31, 2016
887,020
--------------
88,702
887,020
88,702
83,333
----------
5,369
-----------892,389
=======
(4)
Cash (1,000 x 30 x 50)
Share Warrants Outstanding
Ordinary Share (30,000 x 25)
Share Premium
1,500,000
142,980
750,000
892,980
Problem 18
On July 1, 2016, Camil Company issued 200 10%, Php10,000 bonds at face value. the holder of
each bond is entitled to convert the bond into 80, Php100 par ordinary shares of Camil
Company, at anytime up to bond maturity. When the bonds were issued, the prevailing market
rate for similar instruments without the conversion option is 12%. The bonds pay interest
annually at Juen 30 and mature on June 30, 2021.
On June 30, 2018, after paying the annual interest, holders of 120 bonds exercised their
conversion privilege. Remaining bonds were retired on maturity date.
Required:
1.
2.
3.
Allocate the proceeds from bond issuance between the bonds and the equity component
(the bond conversion privilege)
Prepare an amortization table using the effective interest method over the term of the
bonds.
Prepare the entries relating to the foregoing during 2016 through 2020.
(1) Issue price of convertible bonds
Issue price of bonds without conversion privilege
2,000,000 x 0.5674
1,134,800
200,000 x 3.6048
720,960
-------------Allocation to equity
Amortization Table
Interest
Interest
Date
Paid
Expense
07/01/16 - - 06/30/17
200,000
222,691
06/30/18
200,000
225,414
06/30/18
06/30/18
06/30/19
80,000
91,386
06/30/20
80,000
92,572
06/30/21
80,000
94,316*
*Adjusted; difference is due to rounding off.
2,000,000
1,855,760
--------------144,240
=========
(2)
(3)
07/01/16
06/30/17
06/30/18
06/30/18
Premium
Amortization
Bond Carrying
Value
1,855,760
1,878,451
1,903,865
( 1,142,319)
761,546
772,932
785,684
800,000
22,691
25,414
11,386
12,752
14,316
Cash
2,000,000
Discount on Bonds Payable
144,240
Bonds Payable
2,000,000
PIC Arising from Bond Conversion Privilege 144,240
Interest Expense
Discount on Bonds Payable
Cash
222,691
Interest Expense
Discount on Bonds Payable
Cash
225,414
Bonds Payable
PIC Arising from Conversion Privilege
Discount on Bonds Payable
Ordinary Share
Share Premium
22,691
200,000
25,414
200,000
1,200,000
86,544
57,681
960,000
268,863
Carrying value,bonds converted (1,903,865 x 120/200)
Face value of bonds converted
Discount on bonds payable cancelled
Value of equity converted (144,240 x 120/200)
Par value of ordinary shares issued (120 x 80 x 100)
06/30/19
06/30/20
06/30/21
06/30/21
1,142,319
1,200,000
--------------57,681
========
86,544
========
960,000
========
Interest Expense
Discount on Bonds Payable
Cash
91,386
Interest Expense
Discount on Bonds Payable
Cash
92,752
Interest Expense
Discount on Bonds Payable
Cash
94,316
11,386
80,000
12,752
80,000
Bonds Payable
800,000
PIC Arising from Bond Conversion Privilege 57,696
Cash
PIC from Unexercised Bond
Conversion Privilege
(144,240 – 86,544)
14,316
80,000
800,000
57,696
Problem 19
On December 1, 2016, Pau Company issued five-year, non-convertible Php5,000,000 face
value 12% bonds for Php5,386,072, a price that yields 10%. Interest is payable semiannually on
June 1 and December 1.
On April 1, 2019, Pau Company retired Php2,000,000 of the bonds at 104 plus accrued interest.
Required: determine the following:
1.
Carrying value of the bonds on December 31, 2017.
2.
Interest expense for the year ended December 31, 2017.
3.
Carrying value of the bonds retired on April 1, 2019.
4.
Gain or loss on redemption of the bonds on April 1, 2019.
5.
Carrying value of the bonds on December 31, 2019.
6.
Interest expense for the year ended December 31, 2019 and for the year ended
December 31, 2020.
The following table may facilitate the computations required in this problem.
Interest
Interest
Premium
Carrying Value
Date
Paid
Expense
Amortization
Value
12/01/16 - - 5,386,072
06/01/17
300,000
269,304
30,696
5,355,376
12/01/17
300,000
267,769
32,231
5,323,145
06/01/18
300,000
266,157
33,843
5,289,302
12/01/18
300,000
264,465
35,535
5,253,767
06/01/19
300,000
262,688
37,312
5,216,455
12/01/19
180,000
156,494
23,506
3,106,367
06/01/20
180,000
155,318
24,682
3,081,685
12/01/20
180,000
154,084
25,916
3,055,769
06/01/21
180,000
152,788
27,212
3,028,557
12/01/21
180,000
151,443*
28,557
3,000,000
*Adjusted; difference is due to rounding off.
(1)
Carrying value, December 1, 2017 (see, table)
Amortization for one month (33,843 x 1/6) ____
5,323,145
5,640
-------------5,317,505
========
Carrying value, December 31, 2017
(2)
Interest Expense for year 2017
January 1-June 1, 2017 (269,304 x 5/6)
June 1-December 1, 2017
December 1-31, 2017 (266,157 x 1/6) _
224,420
267,769
44,360
-------------536,549
========
Total
(3)
Carrying value of bonds retired on December 1, 2018
5,253,767 x 2/5
2,101,507
Amortization through April 1, 2019 (37,312 x 4/6 x 2/5) ____
9,950
-------------Carrying value of bonds retired on April 1, 2019
2,091,557
========
(4)
Carrying value of bonds retired
Redemption price (2,000,000 x 1.04)
2,091,557
2,080,000
--------------11,557
========
Gain on redemption of bonds
(5)
Carrying value of remaining bonds, December 1, 2019
Amortization through December 31, 2019 (24,682 x 1/6)
Carrying value of remaining bonds, December 31, 2019
(6)
On bonds redeemed:
January 1-April 1, 2019 (262,688 x 2/5 x 3/6)
On remaining bonds
January 1-June 1, 2019 (262,688 x 3/5 x 5/6)
June 1-December 1, 2019
December 1-31, 2019 (155,318 x 1/6)
January 1-June 1, 2020 (155,318 x 5/6)
June 1-December 1, 2020
December 1-31, 2020 (152,788 x 1/6) ______
Interest Expense
3,106,367
4,114
-------------3,102,253
========
2019
52,538
2020
131,344
156,494
25,886
129,432
154,084
25,465
-------------------------------366,262
308,981
==================
Problem 20
Maj Company issued Php10,000,000 bonds on bond issue date, December 31, 2016. The
bonds pay interest annually at 8% on the outstanding balance. The face value of the bonds is
payable in installments of Php2,000,000 every December 31, starting December 31, 2017. The
bonds were sold at a price that yield 12%.
Required:
1.
Determine the issue price of the bonds on December 31, 2016.
2.
Prepare an amortization table using effective interest method.
3.
Prepare entries in the books of Maj Company for years 2017 through 2018 related to the
bonds.
(1)
Issue price of the bonds
Principal
Interest
Due Date
Due
Due
12/31/17
2,000,000
800,000
12/31/18
2,000,000
640,000
12/31/19
2,000,000
480,000
12/31/20
2,000,000
320,000
12/31/21
2,000,000
160,000
Amount
Due
2,800,000
2,640,000
2,480,000
2,320,000
2,160,000
PV Factor
0.8929
0.7972
0.7118
0.6355
0.5674
Selling price of bonds
(2) Amortization Table
Principal
Interest
Effective
Due Date
Due
Due
Interest
12/31/16
12/31/17
2,000,000
800,000
1,088,392
12/31/18
2,000,000
640,000
882,999
12/31/19
2,000,000
480,000
672,159
12/31/20
2,000,000
320,000
455,218
12/31/21
2,000,000
160,000
231,296
*Adjusted; difference is due to rounding off.
(3)
12/31/16
12/31/17
Cash
Discount on Bonds Payable
Bonds Payable
12/31/18
Discount
Carrying
Amortization Value, end
9,069,936
288,392
7,358,328
242,999
5,601,327
192,159
3,793,486
135,218
1,928,704
71,296*
-0-
9,069,936
930,064
10,000,000
Interest Expense
1,088,392
Discount on Bonds Payable
Cash
Bonds Payable
Cash
Interest Expense
Discount on Bonds Payable
Cash
Bonds Payable
Cash
Present Value
2,500,120
2,104,608
1,765,264
1,474,360
1,225,584
-------------9,069,936
========
288,392
800,000
2,000,000
2,000,000
882,999
242,999
640,000
2,000,000
2,000,000