Welcome back. In this module, we're going to continue talking about bonds and long-term debt. But we're going to increase the level of complexity a little bit. We're going to talk about issuing bonds between interest dates with discount or premium. We're going to talk about repaying or bonds early or early extinguishment of debt. We'll talk about added complexity that arises from conversion features, especially when they have beneficial conversion features, and then we'll conclude the discussion of debt and long-term bonds with a discussion on modifications and troubled debt restructurings. So to start, remember you always just address a bond problem step by step. You're going to take the present value of the payments. You're going to take into account the accrued interest that's due. The shortened bond period, and the effective yield adjusted for issuance cost and discount. This is building on what we discussed in module one, but now we're going to take it to the next level. So, let's put it all together. Going back to Padre Pizza. They're issuing $10 million bonds on April first, 2016 then mature in eight years on 12/31/2023. So, the bond period actually started on January first, 2016 but they were issued on April first, 2016. So, there's already three months of accrued interest. The bonds have a stated interest rate of eight percent, but were sold to yielding a quarter percent plus the accrued interest during the period. So now because they were sold to yield eight and a quarter percent, but the standard rate is eight percent, there's a discount. The bonds pay interest semi-annually on June 30th, and December 31st. Padre Pizza also incurred a $100,000 in debt issuance costs. So, what is the price paid for the bonds? What is the yield? Well, let's take the present value of the interest for 15 periods. Why 15? We're going to leave off the first period. It's partial. We'll account for that separately. So, the net present value for 14 periods at the stated rate times 180 over 360 because it's a half-year, the interest is paid semi-annually. Plus the present value of the payment at the end of 10,400,000 paid in the final period that's 10 million of principal repaid plus 400,000 of interest in the final period. We get a total present value coming back to June 30th at $9,862,227. So, we've only come back as far as June 30th. Now, we need to discount that back to April first, the date it was issued. So, we're going to do that by taking the present value again at the same interest rate that it was sold to yield, eight and a quarter percent. We're going to take it times 90 over 360 because we're only accounting for three months of interest, and we've discounted that amount to 9,662,969. Now, that accounts for everything except the accrued interest, and the accrued interest of 200,000 is then included in there as well. So, what do we have? Well, the bonds were sold to yield eight and a quarter percent with three months of accrued interest. They were sold on April first with three months of accrued interest from January first. The amount of cash we received would be the bonds payable amount which net of the discount is $9,858,888 plus 200,000. So, we received $10,058,888. We would record the cash. We would record accrued interest of 200,000 and bonds payable of 958,888. This is just a convention that we use by the way we don't discount that accrued interest typically. We put it in a separate account and just account for a short-term liability. Also on April first, we have the issuance costs that were accounted for. Now, those issuance costs again go against bonds payable as part of the discount on the bonds payable. So, the yield is 8.43 percent and this is the calculated effective yield again based upon that discount. The first interest payment we're going to make. Now, this is the one on June 30th. Remember that these were issued April first. There was 200,000 of accrued interest on the bonds. So, we're going to account for that separately and the remainder of the payment and the amortization of the discount will show as interest expense. So, there's 205,667. Here's an amortization table that we've showed. Again, the only differences at first payment now as a partial payment because we paid 400,000, but the bonds only amortized by the amount of 200,000. What's happened to the other 200,000? It was directly taken against that accrued interest payable. So in summary, it does increase the complexity when the bonds are issued between periods where the discounted premium. There's a number of conventions that are sometimes used to estimate the amounts for amortization of discount of premium in that period. We chose to calculate it precisely by taking the present value of the interest payments and the present value of the principal and then discounting for an additional half a period. You will see other methods in practice. But the theory is going to be the same all the time, that you're going to recognize as part of the payment that you receive from the bondholders as being effectively, that they have paid you for the interests that are going to receive with that first interest payment. So, the first interest payment is only going to partially be attributable to amortization of the bonds, and the rest of it's going to be attributable to essentially repaying the bond holder for the interest they prepaid to you when they bought the bonds. Thank you.