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What is the amount of interest expense

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Question - Green Hills Company sold property to Hanover Company on January 1, 20X1. There was no established exchange price for this property. Hanover gave Green Hills a $2,100,000 zero-interest-bearing note payable in three equal annual installments of $700,000 with the first payment due December 31, 20X1. The note has no ready market. The prevailing rate of interest for a note of this type is 10%. The present value of a $2,100,000 note payable in three equal annual installments of $700,000 at a 10% rate of interest is $1,740,900. What is the amount of interest expense that should be recognized by Hanover in 20X1, using the effective-interest method?

a. $0.

b. $174,090.

c. $70,000.

d. $210,000.

Reference no: EM132767967

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