Cordes Finance Corporation - Page 7

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                                  1986        1,132,417.73                                               
                                  1987        1,065,843.73                                               
                                  1988        995,475.00                                                 
                                  1989        959,489.00                                                 
                                  1990        855,861.00                                                 

                      During respondent's audit of petitioner's 1990 return,                             
                respondent's agent learned of petitioner's practice of                                   
                recording interest income on its books and records only at                               
                the time a loan was paid off or at the time an automobile                                
                was repossessed.  In order to recompute petitioner's                                     
                interest income for Federal tax purposes, the agent                                      
                sought and obtained from petitioner's representatives the                                
                customer ledger cards for all loans outstanding at the                                   
                end of 1990.  From the documents supplied by petitioner's                                
                representatives, including the ledger cards and certain                                  
                loan documents that had been prepared at the time the                                    
                loans were made, the agent computed the amount of deferred                               
                interest on each outstanding loan, the interest that                                     
                should have been reported on that loan using the accrual                                 
                method of accounting, and the amount of deferred interest                                
                with respect to that loan at the end of 1990.  The totals                                
                computed by the agent for all the loans outstanding are as                               
                follows:                                                                                 

                      Aggregate deferred interest                                                        
                      per ledger cards                     $6,175,575.00                                 
                      Interest earned                                                                    
                      through end of 1990                  3,084,179.12                                  
                      Ending deferred interest       3,091,395.88                                        



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