Valix Finacc vol 2 Problem 1-9

Financial Accounting Volume 2 2008 Valix-Peralta
Chapter 1 Problem 1-9

a. Current liabilities:

            Note payable – bank                                                                                     700,000

            Note payable – shareholder                                             2,000,000

            Less: Discount on note payable                                           113,000       1,887,000

            Accrued interest payable                                                                            189,000

            Total current liabilities                                                                                  2,776,000

                                                                                                                                   

b. Note payable – bank:

            January 1 – April 1, 2008 (2,800,000 x 12% x 3/12)                  84,000

            April 1 – December 31, 2008 (2,100,000 x 12% x 9/12)         189,000          273,000

            Note payable – shareholder:

                  Amortization of discount from July 1 – December 31, 2008

                        (226,000 x 6/12)                                                                                   113,000

            Total interest expense                                                                                    386,000