On October 1, 2021, Green Company finished consultation services and accepted in exchange a promissory note with a face value of $40,000, a due date of October 1, 2024, and a stated rate of 6%. 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 (market rate) of 4%. Green prepares financial statements annually on December 31.

Instructions

(a) Determine the present value of the note.

(b) Prepare a Schedule of Note Discount (Premium) Amortization for Green Company under the effective interest method. (Round to whole dollars.)

(c) Prepare any appropriate journal entries for 2021 and 2022.