Recording a Note Payable Issued for Non$-$Cash Consideration

Lathrop Inc. purchased equipment on January $1$ of Year $1$ for $$750,000$ cash plus a note payable. The fair value of the equipment on January $1$ of Year $1$ is $$2,713,330.$ The company uses the effective interest method to amortize discounts and premiums. The market rate is $6\%.$

Required

Record the entries on January $1$ of Year $1$ and December $31$ of each year$-$end for the following three separate scenarios for the note payable.

a$.$ The principal of $$2,000,000$ is due on December $31$ of Year $2,$ and the note states $5\%$ interest payable each December $31$ over the two$-$year period.

b$.$ The face value of the note payable is $$2,206,000$ and is due on December $31$ of Year $2.$ The note is structured as a zero$-$interest$-$bearing note payable over a two$-$year period.

c$.$ The note is due on December $31$ of Year $3$ with equal payments of $$734,501$ due on each December $31$ over the term of the note. The note will be fully paid upon maturity.