On December 31, 20X4, Kay Company sold land that had an original cost of $420,000. In exchange, they accepted $16,000 in cash plus a promissory note with a face value of $400,000, a due date of December 31, 20X6, and a stated rate of 5%, with interest paid December 31 of each year beginning December 31, 20X5. Under the circumstances, the note is considered to have an appropriate rate of interest of 6%. Instructions

(a) Prepare Kay's journal entry to record the transaction on December 31, 20X4.

(b) Prepare all the journal entries (if any) that Kay would record over the life of the note.

2 years duration: 6% 5%

Present Value Single Sum 0.89 0.90703

Present Value Ordinary 1.83339 1.85941

Present Value Annuity Due 1.9434 1.95238

Future Value Single Sum 1.1236 1.1025

Future Value Ordinary 2.06 2.05

Annuity Future Value Annuity Due 2.1836 2.1525