On December 31, 2020, Leone Company issued a promissory note to Lee Interiors Company for architectural services. The note has a face value of $550,000, a due date of December 31, 2025, and bears a stated interest rate of 2 percent, payable at the end of each year. Leone cannot readily determine the fair value of the architectural services, nor is the note readily marketable. On the basis of Leones credit rating, the absence of collateral, the prime interest rate at that date, and the prevailing interest on Leones other outstanding debt, the company imputes an 8 percent interest rate as appropriate in this circumstance.

Required:

Prepare the journal entries on December 31, 2020 and 2021 for this note in Leone Companys books.