The effective interest method is used

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Reference no: EM13866551

On January 1, 2015 Bono Company sold property to Leary Company. There was no established exchange price for the property, and Leary gave bono a $2,000,000 zero interest bearing note payable in 5 equal annual installments of $400,000, with the first payment due December 31,2015. The prevailing rate of interest for a note of this type is 9%. The present value of the note at 9% was $1,442,000 at January 1, 2015. What should be the balance of the discount on the note payable account on the books of Leary at December 31, 2015 after adjusting entries are made, assuming that the effective interest method is used?

A. $0

B. $428,220

C. $446,400

D. $558,000

E. None of the above

Reference no: EM13866551

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