during 20x1, management issued several notes. On may 1, management purchased equipment costing $1,200,000 signing a four-year, 5.5 percent note. On June 30, management signed a $300,000 non-interest bearing one-year note, with a six percent discount rate. On November 1, management signed a $61,050 non-interest bearing three-month to replace accounts payable with a supplier of $60,000.

Prepare journal entries, calculate interest expense for 20x1and 20x2, calculate the effective interest rate for the non-interest bearing notes.