Well, I had to flip to Unit 6 of my Gleim for this one, which is sad because I'm taking the exam on the 17th.  Here's the deal: if the note is exchanged strictly for cash and no other rights or priviliges were exchanged, then the proceeds reflect both the PV and FV of the note.  Therefore, there would be no discount on the note and the effective interest method is irrelevant.  So no interest income would be earned. The writer of the note made it out for 20000 and that is exactly what he will receive.

Now, if the note was not solely for cash but was for PPE, goods, services, etc, then the PV calculation and hence recognition of interest income would be appropriate.