Section Break Chapter 01 Problem 1-26 LO 1-6 Young Company has a 7 percent annual interest rate on its bank loan which the company is in the process of repaying. The loan currently has a principal balance of $15 million. Young Company provides financial statements to the bank in order to meet the bank's loan requirements. Young prepares its financial statements with some help from a local CPA, who provides advice in preparing journal entries and closing the books. Young Company approached several other banks and found two that were willing to offer loans at competitive rates. Country Valley Bank offers a 6% annual interest rate for small businesses that involve a CPA in helping prepare their financial statements. Community Bank offers a 4.5% rate on its loan but would require that Young Company have its financial statements separately audited by an independent CPA firm each year to get that lower rate. Young Company reached out to a local CPA firm and received an estimate of $145,000 annually to provide an independent audit opinion on Young's financial statements each year.