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