On December 31, 2017, Hornets Company finished consultation services and accepted in exchange a promissory note with a face value of $600,000, a due date of December 31, 2020, and a stated rate of 5%, with interest receivable at the end of each year. The fair value of the services is not readily determinable, and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 10%.

Instructions

Show all calculations and round all figures to the whole dollars:

1. Determine the present value of the note.
2. Prepare a Schedule of Note Discount Amortization for Hornets Company under the effective interest method.