ACC 3003 - Final Exam Revision - Solution

ACC 3003- Final Exam- Revision
CLO 1 :Equity transactions
1.On December 31st, 2019 the stockholders Equity section of Abrar Company appears as
follows, after one year of operations:
Common Stock - $10 par value, 5,000,000 shares authorized, $720,000

72,000 shares issued and outstanding
Paid in capital in excess of par value, common stock ($3 per share) 216,000
Preferred Stock - $ 100 par value, 1,000,000 shares authorized, 500,000
5,000 shares issued.
Paid in capital in excess of par value, preferred stock 315,000
Retained Earnings 864,000
Total Stockholders’ Equity $2,615,000
The following transactions took place during 2018:
1. The company issued 5,000 shares common stock for $90,000 cash.
2. The company issued 1,250 shares preferred stock for $250,000 cash. Cost of issuance
was $ 8,000.
3. The company issued 15,000 shares common stock in exchange for land. The land has an
appraised value of $195,000 and the shares are trading on a public stock exchange for
$15 per share.
4. The company reacquired for retirement 2,000 shares of common stock that it had
originally issued in 2017 for a price of $12 per share.
5. Purchased for treasury 5,000 shares of its own common stock for $22 per share.
6. Sold 2,000 treasury shares for $23 per share.
7. Sold 1,000 treasury shares for $ 21 per share.
Required: Prepare journal entries for the above transactions.

Solution
Date Account Dr. Cr.
1 Cash 90,000
CS (5000 shares x $10) 50,000
PIC-cs 40,000
2 Cash (250,000 -8,000) 242,000
PS (1250 shares x $ 100) 125,000
PIC-ps 117,000
3 Land (15,000 shares x $ 15) 225,000
CS (15,000 x $10) 150,000
PIC- cs 75,000
4 CS (2,000 shares x $10) 20,000
PIC –cs (2000 x 3) 6,000
PIC- repurchase (difference) 2,000
Cash (2000 shares x $12) 24,000
5 Treasury Shares (5,000 shares x $ 22) 110,000
Cash 110,000
6 Cash (2,000 x 23) 46,000
PIC – repurchase (difference) 2,000
Treasury shares (2000 x 22) 44,000
7 Cash(1000 x 21) 21,000
PIC – repurchase (difference) 1,000
Treasury shares (1000 x 22) 22,000

2. In 2018, Borland Semiconductors entered into the transactions described below. In
2015, Borland had issued 170 million shares of its $1 par common stock at $34 per
share.
Required:
Assuming that Borland retires shares it reacquires, record the appropriate journal entry
for each of the following transactions:
1. On January 2, 2018, Borland reacquired 10 million shares at $32.50 per share.

2. On March 3, 2018, Borland reacquired 10 million shares at $36 per share.
3. On August 13, 2018, Borland sold 1 million shares at $42 per share.
4. On December 15, 2018, Borland sold 2 million shares at $36 per share.
Solution
1. January 2, 2018 ($ in millions)
Common stock (10 million shares x $1 par)................................. 10

Paid-in capital—excess of par (10 million shares x $33*)........... 330
Paid-in capital—share repurchase (difference)..................... 15
Cash (10 million shares x $32.50)............................................ 325
* $34 – $1 par
2. March 3, 2018
Common stock (10 million shares x $1)...................................... 10
Paid-in capital—excess of par (10 million shares x $33*)............. 330
Paid-in capital—share repurchase (available balance)............... 15
Retained earnings (remainder).................................................. 5
Cash (10 million shares x $36)................................................. 360
* $34 – $1 par
3. August 13, 2018
Cash (1 million shares x $42)...................................................... 42
Common stock (1 million shares x $1).................................... 1
Paid-in capital—excess of par (remainder)........................... 41
4. December 15, 2018
Common stock (2 million shares x $1).................................... 2
Paid-in capital—excess of par (remainder)........................... 70
3. In 2018, Western Transport Company entered into the treasury stock transactions
described below. In 2016, Western Transport had issued 140 million shares of its $1 par
common stock at $17 per share.
Required:
Prepare the appropriate journal entry for each of the following transactions:
1. On January 23, 2018, Western Transport reacquired 10 million shares at $20 per
share.
2. On September 3, 2018, Western Transport sold 1 million treasury shares at $21
per share.
3. On November 4, 2018, Western Transport sold 1 million treasury shares at $18
per share.
Solution
1. January 23, 2018 ($ in millions)
Treasury stock (10 million shares x $20)..................................... 200

Cash.................................................................................... 200
2. September 3, 2018
Treasury stock (1 million shares x $20)................................... 20
Paid-in capital—share repurchase (remainder)..................... 1
3. November 4, 2018
Paid-in capital—share repurchase (available balance from req. 2.) 1
Retained earnings (remainder).................................................. 1
Treasury stock (1 million shares x $20)................................... 20
CLO 2: Partnership income distribution
1. John and Jones started a partnership on Jan 1, 2019. John invested $180,000 and Jones
invested $120,000. During the year John withdrew $5,000 and the partnership made a profit of
$60,000. The partners are paid salary of $12,000 and $8,000 respectively. Each partner gets 5%
interest on their initial investment. All profits and losses are shared between John and Jones in
the ratio 7:3 respectively.
a. Prepare a schedule of income distribution.
b. Prepare the journal entry for the distribution of net profit/loss
Solution
Schedule of Distribution of Net Income

Description John Jones Total
Net Income earned during year 60,000
Interest on initial Investment
Interest Rate @ 5%
John: 180,000 x 5%
Jones: 120,000 x 5% 9,000 6,000 (15,000)
45,000
Salary 12,000 8,000 (20,000)
Net income or Loss for
distribution 25,000
Distribution of loss (7:3) 17,500 7,500 (25,000)

Distribution of Net Income 38,500 21,500 0
b. Journal Entries
Date Name of the account Dr/Cr Debit Amt Credit Amt
Income summary 60,000
John’s capital 38,500
Jones’ s capital 21,500

2.John and Jones started a partnership on Jan 1, 2019. John invested $180,000 and Jones
invested $120,000. During the year John withdrew $5,000 and the partnership made a loss of
$40,000. The partners are paid salary of $12,000 and $6,000 respectively. Each partner gets 5%
interest on their initial investment. All profits and losses are shared between John and Jones in
the ratio 7:3 respectively.
b. Prepare the journal entry for the distribution of net profit/loss
Solution
a. Schedule of Distribution of Net Income

Description John Jones Total
Net Income earned during year (40,000 )
Interest on initial Investment
Interest Rate @ 5%
John: 180,000 x 5%
Jones: 120,000 x 5% 9,000 6,000 (15,000)
(55,000)
Salary 12,000 6,000 (18,000)
Net income or Loss for
distribution (73,000)
Distribution of loss (7:3) (51,100) (21,900) 73,000

Distribution of Net Income (30,100 ) (9,900) 0
Date Name of the account Dr/Cr Debit Credit
John’s capital 30,100
Jones’ s capital 9,900
Income summary 40,000
3. A partnership begins its first year with the following capital balances:
Alfred, Capital $ 50,000
Bernard, Capital 60,000
Collins, Capital 70,000
The articles of partnership stipulate that profits and losses be assigned in the following manner:
Each partner is allocated interest equal to 5 percent of the beginning capital balance.
Bernard is allocated compensation of $18,000 per year.
Any remaining profits and losses are allocated on a 3:3:4 basis, respectively.
Each partner is allowed to withdraw up to $5,000 cash per year.
The net income is $60,000 and that each partner withdraws the maximum amount allowed,
what is the balance in Collins capital account at the end of that year?
Required
b. Prepare statement of capital
Solution
ALLOCATION OF NET INCOME
ALFRED BERNARD COLLINS TOTAL
Net income $60,000
Interest—5% of beginning capital $ 2,500 $ 3,000 $ 3,500 (9,000)
51,000
Salary ......................................18,000 (18,000)
Remainder to allocate............ $33,000
($33,000 divided on a 3:3:4 basis) 9,900 9,900 13,200 (33,000)
Total allocation ............ $12,400 $30,900 $16,700 -0-
STATEMENT OF CAPITAL
ALFRED BERNARD COLLINS TOTAL
Beginning capital ................... $50,000 $60,000 $70,000 $180,000
Net income (above) ............... 12,400 30,900 16,700 60,000
Drawings (given) .................... (5,000) (5,000) (5,000) (15,000)
Ending capital ........................ $57,400 $85,900 $81,700 $225,000
CLO 2:Partnership Liquidation

1.A partnership has the following balance sheet prior to liquidation:
Cash $ 66,000 Liabilities $ 100,000
Other assets 200,000 Bana, capital (40%) 48,000
Dana, capital (30%) 58,000
Mena, capital (30%) 60,000
Total $ 266,000 Total $ 266,000
During liquidation, other assets are sold for $160,000, liabilities are paid in full,
and $30,000 in liquidation expenses are paid.
Required:
What amount of cash does each partner receive as a result of this liquidation?
Show all calculations.
Solution
Beginning cash balance $ 66,000
Sale of noncash assets 160,000
Subtotal $ 226,000
Payment of liabilities (100,000)
Payment of liquidation expenses (30,000)

Cash distributed to partners $96,000
Bana Dana Mena
Capital balances $48,000 $58,000 $60,000
Loss on sale of assets ($40,000) (16,000) (12,000) (12,000)
Liquidation expenses ($30,000) (split (12,000) (9,000) (9,000)

4:3:3)
Remaining balances = cash distributed $20,000 $ 37,000 $ 39,000
2. A partnership has the following balance sheet prior to liquidation (partners’

profit and loss ratios are in parentheses):
Cash $ 33,000 Liabilities $ 50,000
Other assets 100,000 Playa, capital (40%) 24,000
Bahia, capital (30%) 29,000
Arco, capital (30%) 30,000
Total $133,000 Total $133,000

During liquidation, other assets are sold for $80,000, liabilities are paid in full, and
$15,000 in liquidation expenses are paid. What amount of cash does each partner
receive as a result of this liquidation?
Solution
Cash to be distributed to partners:
Beginning cash balance $33,000

Sale of noncash assets 80,000
Subtotal $113,000
Payment of liabilities (50,000)
Payment of estimated liquidation expenses (15,000)
Cash distributed to partners $48,000
Playa Bahia Arco

Capital balances .......................................... $24,000 $29,000 $30,000
Loss on sale of other assets ($20,000) (split
on a 4:3:3 basis) ........................................ (8,000) (6,000) (6,000)
Liquidation expenses ($15,000) (split
on a 4:3:3 basis) ........................................ (6,000) (4,500) (4,500)
Remaining balances .................................... $10,000 $ 18,500 $ 19,500
CLO -3: Investment in Debt Held to maturity
1.Richie Corporation acquired as a long-term investment $260 million of 6%

bonds, dated July 1, on July 1, 2018. Company management has the positive
intent and ability to hold the bonds until maturity. The market interest rate (yield)
was 8% for bonds of similar risk and maturity. Richie paid $220 million for the
bonds. The company will receive interest semiannually on June 30 and December
31. As a result of changing market conditions, the fair value of the bonds at
December 31, 2018, was $210 million.
Required:
1. Prepare the journal entry to record Richie’s investment in the bonds on July
1, 2018.
Solution
Date Account Dr Cr
July 1, 2018 Investment in bonds (face amount) 260 million
Discount on bond investment (difference) 40 million
220 million
Cash (price of bonds)
2. Prepare the amortization schedule for the bonds up to the December 31st 2019
Amortization Schedule—Discount
Date Cash interest Interest Revenue 4% Increase Outstanding

3% (effective interest in balance Balance
July 1, 220 million

2018
Dec, 31 7.8 million 8.8 million 1.0 221 million

2018 [260×3%] [220×4%] million
Jun, 30 7.8 million 8.84[221×4%] 1.04 222.04

2019 million million
Dec, 31 7.8 million 8.88[201.632×4% 1.08 223.12

2019 ] million million
3. Prepare the journal entries by Richie to record interest on December 31, 2018, at the
effective (market) rate.
Date Account Dr Cr
Dec, 31, 7.8 million

2018 Cash (3% x $240 million)
Discount on bond investment (difference) 1.0 million
Interest revenue (4% x $200) 8.8 million
4. At what amount will Richie report its investment in the December 31, 2018, balance
sheet? Why?
Richie reports its investment in the December 31, 2018, balance sheet at its amortized
cost—that is, its book value:
Investment in bonds......................................................... $260.0

Less: Discount on bond investment ($40 – 1.0 million) 39.0
Amortized cost............................................................. $221
5. Suppose Moody’s bond rating agency downgraded the risk rating of the bonds
motivating Richie to sell the investment on January 2, 2019, for $200 million. Prepare the
journal entry to record the sale
Date Account Dr Cr
Jan 2, 2019 Cash 200 million
Discount on bond investment (difference) 39 million
Loss on sale of investment 21 million
Investment in Bonds 260 million
Debt investment (Available for sale )

2. On January 1, 2016 Global Company purchased $630,000, 6% bonds of Euclid Co. for
$670,000. The bonds were purchased to yield 5% interest (market rate). Interest is payable
semiannually on June 30 and December 31. The bonds mature on December 31 2020.
Global Company uses the effective-interest method to amortize discount or premium. On
December 31 2018 Global Company sold the bonds for $625,000 after receiving interest to
meet its liquidity needs.
Required:
1. Prepare the journal entry to record the purchase of bonds on January It 2016. Assume
that the bonds are classified as available-for-sale.
2. Prepare the amortization schedule for the bonds up till December 31, 2017. Round up
or down to the nearest dollar.
3. Prepare the necessary journal entries for interest during 2016 and any necessary
adjusting entry assuming that the bonds had a fair value of $ 660,000 on December 31,
2016.
4. Assuming that the fair value of Euclid bonds is $670,500 on December 31, 2017
prepare the necessary adjusting entry for fair value
Solution
Date Debit Credit
Investments in Debts 630,000
1/1/2016
Premium on Debts’ investment 40,000
Cash 670,000
2. Amortization Schedule—Premium
Date Cash interest Interest Revenue Decrease in Outstanding

3% 2.5% (effective balance Balance
interest
1/1/2016 670,000
30/6/2016 18,900 16750(670,000 2150 667850

x 2.5%)
(630,000 x
3%)
18,900
31/12/201 16696 2204 665,646
6
18,900
30/6/2017 16641 2259 663,387
18,900
31/12/201 16585 2315 661,072
7
Date Debit Credit

Cash 18,900
30/6/2016
Premium on Debts’ investment 2150
Interest Revenues 16,750
Cash 18,900
31/12/2016
Premium on Debts’ investment 2204
Interest Revenues 16696
Unrealized loss 5646

31.12.2016
FVA 5646
660,000- 665,646= 5646 loss
Date Debit Credit

FVA 15,074
31.12.2017
Unrealized gain 15,074
670,500 -661,072= 9428----- (9428+5646)
CLO -4 :Long-term Contract

1.Butterfly Construction Company uses the percentage-of-completion method of accounting for long-
term construction contracts. During 2018, Butterfly began work on a construction contract that
generates AED 1,500,000 revenue and which is due to be completed in 2020. The accounting records
shows the following at year-end:
2018 2019 2020
Contract costs incurred during the year AED 300,000 AED 480,000 AED 270,000
Estimated costs to complete as of year end 700,000 260,000 -0-

Billings during the year 625,000 375,000 500,000
Cash collections during the year 525,000 475,000 500,000
Required:
a. Calculate the percentage of completion for 2018, 2019 and 2020.
b. Prepare all necessary journal entries for 2018.
c. What amount of gross profit and revenue would be recognized in 2018, 2019 and 2020?
d. What amount of total gross profit will be recognised for the whole contract?
Solution
a.
2018 2019 2020
Construction cost during the year 300,000 480,000 270,000
Construction cost incurred prior year 0 300,000 780,000
Actual cost to date (a) 300,000 780,000 1,050,000
Estimated remaining cost to complete 700,000 260,000 -0-

(b)
Total cost (a+b) c 1,000,000 1,040,000 1,050,000
% of completion( a/ c) 30% 75% 100%
OR
2018 300,000 / (300,000 +700,000 ) *100 = 30%
2019 480,00+300,000 / (48000+ 300,000 +260,000 ) *100 = 75%

2020 270,000+480,00+300,000 / (270,000+48000+ 300,000 +0 ) *100= 100%
b.Journal Entries
(To record costs of the project)
Construction in progress 300,000
Cash/ material/ inventory/ etc.. 300,000
(To record billings on the project)
Accounts receivable 625,000

Billings 625,000
(To record receipt of cash)
Cash 525,000
Accounts receivable 525,000
(To recognize revenue earned & gross profit for 2018)
Cost of construction 300,000

Construction revenue (30% x AED 1.5million) 450,000
c. What amount of gross profit and revenue would be recognized in 2018, 2019, 2020 ?
Contract price (given) 1,500,000 1,500,000 1,500,000

% of completion 30% 75% 100%
Cumulative revenue to be recognized 450,000 1125,000 1,500,000
Less: Revenue recognized in prior periods 0 450,000 1125,000
Revenue recognized in the current period 450,000 675,000 375,000
Less: Cost of construction 300,000 480,000 270,000
Gross profit 150,000 195,00 105,000
Total Revenue of Contract - Total Cost incurred
1,500,000 – 1,050,000 = AED 450,000
2. Zest Construction Company uses the percentage-of-completion method of accounting for long-term
construction contracts. During 2016, Zest began work on a construction contract that generates AED
3,000,000 revenue and which is due to be completed in 2018. The accounting records shows the
following at year-end:
2016 2017 2018

Contract costs incurred during the year AED 600,000 AED 960,000 AED 540,000
Estimated costs to complete as of year end 1,400,000 520,000 -0-

Billings during the year 1,250,000 750,000 1,000,000
Cash collections during the year 1,050,000 950,000 1,000,000
Required:
a. Calculate the percentage of completion for 2016, 2017 and 2018.
c. What amount of gross profit and revenue would be recognized in 2016 , 2017 and 2018?
Required:
a. Calculate the percentage of completion for 2016, 2017 and 2018
Solution
2016 2017 2018

Construction cost during the year 600,000 960,000 540,000
Construction cost incurred prior year 0 600,000 1560,000
Actual cost to date (a) 600,000 1,560,000 2,100,000
Estimated remaining cost to complete 1,400,000 520,000 -0-

(b)
Total cost (a+b) c 2,000,000 2,080,000 2,100,000
% of completion( a/ c) 30% 75% 100%
OR
Workings
2018 600,000/(600,000+1,400,000) = 600,000/2,000,000 = 30%
2019 (960,000+600,000) / (600,000+ 960,000+520,000) = 75%
2020 2,100,000 / 2,100,000 = (100%)

(To record costs of the project)
Cash/ material/ inventory/ etc.. 600,000
(To record billings on the project)
Accounts receivable 1,250,000

Billings 1,250,000
(To record receipt of cash)
Cash 1,050,000
Accounts receivable 1,050,000
(To recognize revenue earned & gross profit for 2016)
Cost of construction 600,000

Construction revenue (30% x AED 3million) 900,000
c. What amount of gross profit and revenue would be recognized in 2016, 2017, 2018 ?
Contract price (given) 3,000,000 3,000,000 3,000,000
% of completion 30% 75% 100%
Cumulative revenue to be recognized 900,000 2,250,000 3,000,000
Less: Revenue recognized in prior periods 0 900,000 2,250,000
Revenue recognized in the current period 900,000 1,350,000 750,000
Less: Cost of construction 600,000 960,000 540,000
Gross profit 300,000 390,000 210,000
Total Revenue of Contract - Total Cost incurred
3,000,000 – 2,100,000 = AED 900,000
CLO -4 : Installment method and cost recovery method

1. On June 1, 2013, the Luttman and Dowd Company sold inventory to the Ushman Corporation
for $400,000. Terms of the sale called for a down payment of $100,000 and four annual
installments of $75,000 due on each June 1, beginning June 1, 2014. Each installment also will
include interest on the unpaid balance applying an appropriate interest rate. The inventory
cost Foster $150,000.
Required:
1. Applying installment sales method compute the amount of gross profit for each year and
prepare journal entries 2013.
Solution
Installment sales method
Cost % = 150,000 / 400,000 *100 = 37.5%
Gross profit % = 100% - 37.5% = 62.5% (OR) (GP/ Revenue *100) = 250,000 / 400,000 *100 = 62.5%
Year Cash Collected Cost (37.5%) Gross Profit (62.5%)
2013 $100,000 $ 37,500 $ 62,500
2014 75,000 28,125 46,875
2015 75,000 28,125 46,875
2016 75,000 28,125 46,875
2017 75,000 28,125 46,875
Totals $400,000 $150,000 $250,000

Journal Entries
June 1, Installment receivable 400,000
2013
Inventory 150,000
Deferred gross profit 250,000
to record installment sales
June 1, Cash 100,000
2013
Installment receivable 100,000
To record cash collection 1st payment (down
payment)
Deferred Gross Profit (62.5% x 100,000) 62,500
Realized Gross Profit 62,500
To recognize gross profit from 1st payment
2. On June 1, 2013, the Luttman and Dowd Company sold inventory to the Ushman Corporation
for $400,000. Terms of the sale called for a down payment of $100,000 and four annual
installments of $75,000 due on each June 1, beginning June 1, 2014. Each installment also will
include interest on the unpaid balance applying an appropriate interest rate. The inventory
cost Foster $150,000.
Required:
Applying the cost recovery method compute the amount of gross profit recognized for all
years and prepare journal entries 2013.
Solution
Cost Recovery Method (GP recognized only after cost recovered)
Year Cash Collected Cost Recovery Gross Profit
2013 $100,000 $100,000 -0-
2014 75,000 50,000 $ 25,000
2015 75,000 -0- 75,000
2016 75,000 -0- 75,000
2017 75,000 -0- 75,000
Totals $400,000 $150,000 $250,000
Journal Entries
June 1, Installment receivable 400,000
2013
Inventory 150,000
Deferred gross profit 250,000
to record installment sales
June 1, Cash 100,000
2013
Installment receivable 100,000
To record cash collection 1st payment (down
payment)
------------------

ACC 3003 - Final Exam Revision - Solution

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ACC 3003- Final Exam- Revision

CLO 1 :Equity transactions

Common Stock - $10 par value, 5,000,000 shares authorized, $720,000

The following transactions took place during 2018:

Required: Prepare journal entries for the above transactions.

Date Account Dr. Cr.

CS (5000 shares x $10) 50,000

2 Cash (250,000 -8,000) 242,000

PS (1250 shares x $ 100) 125,000

3 Land (15,000 shares x $ 15) 225,000

CS (15,000 x $10) 150,000

4 CS (2,000 shares x $10) 20,000

PIC –cs (2000 x 3) 6,000

PIC- repurchase (difference) 2,000

Cash (2000 shares x $12) 24,000

5 Treasury Shares (5,000 shares x $ 22) 110,000

6 Cash (2,000 x 23) 46,000

PIC – repurchase (difference) 2,000

Treasury shares (2000 x 22) 44,000

7 Cash(1000 x 21) 21,000

PIC – repurchase (difference) 1,000

Treasury shares (1000 x 22) 22,000

1. On January 2, 2018, Borland reacquired 10 million shares at $32.50 per share.

1. January 2, 2018 ($ in millions)

Common stock (10 million shares x $1 par)................................. 10

1. January 23, 2018 ($ in millions)

Treasury stock (10 million shares x $20)..................................... 200

Schedule of Distribution of Net Income

Distribution of loss (7:3) 17,500 7,500 (25,000)

Date Name of the account Dr/Cr Debit Amt Credit Amt

Income summary 60,000

John’s capital 38,500

Jones’ s capital 21,500

a. Schedule of Distribution of Net Income

Distribution of loss (7:3) (51,100) (21,900) 73,000

Date Name of the account Dr/Cr Debit Credit

John’s capital 30,100

Jones’ s capital 9,900

Income summary 40,000

CLO 2:Partnership Liquidation

Payment of liquidation expenses (30,000)

Bana Dana Mena

Capital balances $48,000 $58,000 $60,000

Loss on sale of assets ($40,000) (16,000) (12,000) (12,000)

Liquidation expenses ($30,000) (split (12,000) (9,000) (9,000)

Remaining balances = cash distributed $20,000 $ 37,000 $ 39,000

2. A partnership has the following balance sheet prior to liquidation (partners’

Total $133,000 Total $133,000

Beginning cash balance $33,000

Playa Bahia Arco

CLO -3: Investment in Debt Held to maturity

1.Richie Corporation acquired as a long-term investment $260 million of 6%

July 1, 2018 Investment in bonds (face amount) 260 million

Discount on bond investment (difference) 40 million

Date Cash interest Interest Revenue 4% Increase Outstanding

July 1, 220 million

Dec, 31 7.8 million 8.8 million 1.0 221 million

Jun, 30 7.8 million 8.84[221×4%] 1.04 222.04

Dec, 31 7.8 million 8.88[201.632×4% 1.08 223.12

Dec, 31, 7.8 million

Discount on bond investment (difference) 1.0 million

Interest revenue (4% x $200) 8.8 million

Investment in bonds......................................................... $260.0