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?