On December 1 Showcase Interiors purchased a shipment

of furniture
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.Instructionsa. Compute the present value of the note
payable, using a discount rate of 1½ percent per month.b. Prepare the journal entries in the
accounts of Showcase Interiors on:1. December 1, to record the purchase of the furniture (debit
Inventory).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. (Round interest
expense to the nearest dollar.)c. Show how the liability for this note would appear in the balance
sheet at December 31.View Solution:
On December 1 Showcase Interiors purchased a shipment of furniture
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