Face amount of the note: 4,000,000.

00
Type of note: Long-term noninterest bearing note
Date of note: January 1, 20x1
Maturity date: December 31, 20x4
Cash flows: P1M due annually every Dec. 31
Effective interest rate: 12%

Annual Cash flows 1,000,000.00

PV of ordinary annuity of 1 @12%, n=4 3.03734934662641
Initial measuremnt of note 3,037,349

Date Collections Interest Income

1/1/x1
12/31/x1 1,000,000 364,482
12/31/x2 1,000,000 288,220
12/31/x3 1,000,000 202,806
12/31/x4 1,000,000 107,143
Amortization Present Value
3,037,349
635,518 2,401,831
711,780 1,690,051
797,194 892,857
892,857 -
Face amount of note: 1,200,000.00
Type of note: Long-term noninterest-bearing
Date of note: January 1, 20x1
Cash flows: P1.2M due on Dec. 31, 20x3
Effective interest rate: Unknown
Cash price Equivalent 1,000,000.00

Face amount 1,200,000

Initial measurement of note 1,000,000
Effective interest rate 6.27%

Date Interest income Unearned interest Present value

1/1/x1 200,000 1,000,000
12/31/x1 62659 137341 1,062,659
12/31/x2 66585 70757 1,129,243
12/31/x3 70757 0 1,200,000