Original effective rate 5% Effective rate @ DOA 4%

Stated rate 2% Stated rate 2%

Remaining term @ DOA 3 years Remaining term @ DOA 3 years

PV of P PV of P
Principal 100,000.00 Principal 100,000.00
PVF 0.86 86,383.76 PVF 0.89 88,899.64
PV of I PV of I
Interest 2,000.00 Interest 2,000.00
PVFOA 2.72 5,446.50 PVFOA 2.78 5,550.18
CV of bonds 91,830.26 FV of bonds @ DOA 94,449.82
CV of bonds, end of Y1 94,421.77 CV of bonds, end of Y1 96,227.81
 Separate books of S Conso
Y1 Interest Expense 4,591.51 Interest Expense
Cash 2,000.00 Cash
Discount on Bonds 2,591.51 Discount on Bonds

T P NCI
Amortization of UVL 813.52 732.17 81.35 Interest expense of S is overstated

Y2 Interest Expense 4,721.09 Interest Expense

Cash 2,000.00 Cash
Discount on Bonds 2,721.09 Discount on Bonds

T P NCI
Amortization of UVL 871.98 784.78 87.20 Interest expense of S is overstated
 3,777.99
2,000.00
t on Bonds 1,777.99

xpense of S is overstated

3,849.11
2,000.00
t on Bonds 1,849.11

xpense of S is overstated
Example:
BV P100,000 FV P120,000
Remaining life 10 years

Depreciation (separate of S)= P10,000 Depreciation (conso) = P12,000

Depreciation expense is kulang

Net income reported by Subsidiary will be sobra

Amortization of UVA is allocated between Parent and NCINI

Shortcut computation: UVA divided by remaining life times fractional year