Infinite Solutions Ltd. purchases inventory on 1 September 20X7 and signs a note with the supplier, agreeing to pay $90,000 on 31 August 20X9, plus annual interest at 2% each 31 August. The market interest rate for similar term and security is 8%. Assume also that the inventory purchased does not have a readily determinable market value. The company has a December 31 year end.

Required:
1. Calculate the present value of the note payable.
2. Prepare a table that shows the balance of the note payable and interest expense over the life of the note using the effective interest method.
3. Provide all entries for the note from 20X7 to 20X9. Use the gross method.