28

On January 1, 2021, Sheffield Corp. sold property to Pharoah Company which originally cost Sheffield $2710000. There was no established exchange price for this property, Pharoah gave Sheffield a $4230000 zero interest-bearing note payable in three equal annual installments of $1410000 with the first payment due December 31, 2021. The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a $4230000 note payable in three equal annual installments of $1410000 at a 10% rate of interest is $3506670. What is the amount of interest income that should be recognized by Sheffield in 2021, using the effective interest method? $141000 $0. $423000 $350667