On December 31, 2010, Hall Company finished consultation services and accepted in exchange a promissory note with a face value of $500,000, a due date of December 31, 2013, and a stated rate of eight percent (8%), with interest receivable at the end of each year. It is determined that the effective rate for this type of note is ten percent (10%).

Part I:

Record this transaction on December 31, 2010. Clearly label each journal entry. For each component of the journal entry, clearly state whether the entry (dr./cr.) is made to the income statement (I/S), balance sheet (B/S) or statement of other comprehensive income (OCI).

The image provided above is the solution. However, I do not understand how they got 2.487 & 0.751, which i highlighted in yellow. Can someone show me the full calculations to solve this problem?

On December 31, 2010, Hall Company finished consultation services and accepted in exchange a promissory note with a face value of $500,000, a due date of December 31, 2013, and a stated rate of eight percent (8%), with interest receivable at the end of each year. It is determined that the effective rate for this type of note is ten percent (10%). PARTI (7 marks) REQUIRED: Record this transaction on December 31, 2010. Clearly label each journal entry. For each component of the journal entry, clearly state whether the entry (dr./cr.) is made to the income statement (1/S), balance sheet (B/S) or statement of other comprehensive income (OCI). For example, Dr. Cash (B/S) $10, Cr. Revenue (1/S) $10. Solution = (a) Present value of interest Present value of principal $40,000 ~ 2.487 = $500,000 *.751 $ 99,480 375,500 $474.980 (5 marks for calculation) Dr. Note Receivable (BS) $474,980 Cr. Service Revenue (IS) $474,980 (2 marks for the journal entry)