Non interest bearing note payable lump sum

On January 1,2020 an entity acquired an equipment for 1,000,000. the entity paid 100,000 down and
signed a non interest bearing note for the balance which I due after 3 years on January 1, 2023.

There was no established cash price for the equipment. The prevailing interest rate for this type of
note is 10%. The present value of 1 of 3 periods is .7513.

Computation
Down payment 100,000
Present value of note (900,000x .7513) 676,170
Cost of equipment 776,170

Imputed interest

Face value of note 900,000

Present value of note 676,170
Imputed interest 233,830

Table of Amortization

Date Interest expense Discount on note payable Present value

01/01/20 --- 223,830 676,170
12/31/20 67,617 156,213 743,787
12/31/21 74,379 81,834 918,166
12/31/22 81,834 --- 900,000

Journal entry

01/01/2020
Equipment 776,170
Discount on note payable 223,830
Cash 100,000
Note payable 900,000

12/31/20
Interest expense 67,617
Discount on note payable 67,617

01/01/23
Note payable 900,000
Cash 900,000