At the beginning of 2016, VHF Industries acquired a equipment with a fair value of $6,339,740 by issuing a four-year, noninterest-bearing note in the face amount of $8 million. The note is payable in four annual installments of $2 million at the end of each year.

1. What is the effective rate of interest implicit in the agreement?

2. Record these three transactions: 01/01/2016 purchase of the equipment, interest expense on 31/12/2016, and interest expense on 31/12/2017.

3. Suppose the market value of the equipment was unknown at the time of purchase, but the market rate of interest for notes of similar risk was 9%. Prepare the journal entry to record the purchase of the equipment on 01/01/2016.

Enter your answers as whole dollars.