On January 1, 2010, Jacobs Company Sold Property to Dains

On January 1, 2010, Jacobs Company sold property to Dains Company which originally cost Jacobs $760,000.There was no established exchange price for this property.Dains gave Jacobs a $1,200,000 zero-interest-bearing note payable in three equal annual installments of $400,000 with the first payment due December 31, 2010.The note has no ready market.The prevailing rate of interest for a note of this type is 10%.The present value of a $1,200,000 note payable in three equal annual installments of $400,000 at a 10% rate of interest is $994,800.What is the amount of interest income that should be recognized by Jacobs in 2010, using the effective-interest method?

A) $0.
B) $40,000.
C) $99,480.
D) $120,000.