On December 31, 2016, Green Company loaned money accepted in exchange a promissory note with a face value of $800,000, a due date of December 31, 2019, and a stated rate of 5%, with interest receivable at the end of each year. Under the circumstances, the note is considered to have an appropriate market rate of interest of 10%.

Instructions

1 Prepare the journal entry at issuance.

2 Prepare the entry to record interest on December 31, 2017?

3 What is the carrying value of the note on December 31, 2018?

4 What is the balance in the Discount or Premium account on January 1, 2018?