On december 1 showcase interiors purchased a shipment of

Reference no: EM13571721

On December 1, Showcase Interiors purchased a shipment of furniture from Colonial House by paying $10,500 cash and issuing an installment note payable in the face amount of $28,800. The note is to be paid in 24 monthly installments of $1,200 each. Although the note makes no mention of an interest charge, the rate of interest usually charged to Showcase Interiors in such transactions is 1½ percent per month. Use Table PV-2 a. Compute the present value of the note payable, using a discount rate of 1½ percent per month. Present value $ b. Prepare the journal entries in the accounts of Showcase Interiors on : 1. December 1, to record the purchase of the furniture. 2. December 31, to record the first $1,200 monthly payment on the note and to recognize interest expense for one month by the effective interest method. Date General Journal Debit Credit Dec. 1 Dec. 31 c. Show how the liability for this note would appear in the balance sheet at December 31.

Reference no: EM13571721

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