On December 31, 2010, Pauline Company signed a 3%, $5,000,000 note with Norman City Bank. The market rate of interest on 12-31-10 was 4%. The note requires annual interest payments every December 31 starting on 12-31-11 and the note is scheduled to mature on 12-31-21. During 2015, Pauline's financial situation worsened and Norman estimated that as of 12-31-15, it would only be able to collect $3,000,000 from Pauline on 12-31-18. Norman did estimate, however, that Pauline would continue to make the required annual interest payments.
o Determine the amount of cash Norman gave Pauline on 12-31-10.
o Prepare the adjusting journal entry Norman should make on 12-31-15 as a result of the impairment.