Exhibit 14-11 Hernandez, Ltd.issued a three-year, $100, 000, non-interest-bearing note to a customer on January 1, 2010.Hernandez also agrees to sell inventory to the customer at reduced rates over a five-year period.Hernandez's incremental interest rate is 10%, and the present value of the note is $75, 132.
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Refer to Exhibit 14-11.Hernandez's interest expense for 2011 is

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The interest expense for 2011 is calculated by applying the incremental interest rate of 10% to the present value of the note at the beginning of 2011. The present value at the beginning of 2010 is $75,132. The interest for 2011 is 10% of $75,132, which is $7,513.20. This amount is added to the present value to get the value at the beginning of 2011, which is $75,132 + $7,513.20 = $82,645.20. The interest expense for 2011 is 10% of this new amount, which is $8,264.52, rounded to $8,265.