On January 1, 2016, Racine Company accepted a 10% note, dated January 1, 2016, with a face amount of $ 2,400,000 in exchange for cash. The note is due in 10 years. For notes of similar risk and maturity, the market interest rate is 12%. Interest is paid each December 31.
Required
a. Determine the present value of the note at January 1, 2016.
b. Prepare the journal entry at the issuance of the note.
c. Prepare the journal entry to record the interest revenue for the first two years.