Comprehensive Isanti Inc. finances its capital needs approximately one-third from long-term debt and two-thirds from equity. At December 31, 2015, Isanti had the following liability and equity items: 11% debenture bonds payable, face amount $5,000,000 Premium on bonds payable 352,400 Common stock 8,000,000 Additional paid-in capital 2,295,000 Retained earnings 2,465,000 Treasury stock, at cost 325,000

Transactions during 2016 and other information relating to Isanti's liabilities and equity accounts were as follows:

The debenture bonds were issued on December 31, 2013, for $5,378,000 to yield 10%. The bonds mature on December 31, 2025. Interest is payable annually on December 31. Isanti uses the interest method to amortize bond premium.

Isanti's common stock shares are traded on the over-the-counter market. At December 31, 2015, Isanti had 2,000,000 authorized shares of $10 par common stock.

On January 15, 2016, Isanti reissued 15,000 of its 25,000 shares of treasury stock for $225,000. The treasury stock had been acquired on February 24, 2015.

On March 2, 2016, Isanti issued a 5% stock dividend on all issued shares. The market price of Isanti's common stock at the time of issuance was $14 per share.

On November 2, 2016, Isanti borrowed $4,000,000 at 9%, evidenced by an unsecured note payable to United Bank. The note is payable in five equal annual principal installments of $800,000. The first principal and interest payment is due on November 2, 2017.

On December 31, 2016, Isanti owned 10,000 shares of Ryan Corp.'s common stock, which represented a 1% ownership interest. Isanti treats this marketable equity investment as a long-term investment in available-forsale securities. The stock was purchased on November 2, 2016, at $20 per share. The market price was $18 per share on December 31, 2016. Isanti's net income for 2016 was $2,860,000.

Required 1. Prepare the shareholders' equity section of Isanti's December 31, 2016, balance sheet.

2. Prepare a schedule showing interest expense for the year ended December 31, 2016.