Answer:
A) using an excel spreadsheet and the NPV function, I calculated the present value of the note to be $24,036.49
=NPV(1.5%, 24 values of 1200 each) = $24,036.49
B)
December 1, merchandise purchase:
Dr Merchandise inventory 34,536.49
Cr Cash 10,500
Cr Notes payable - Colonial House 24,036.49
Cr Interest payable - Colonial House 4,763.51
December 31, first installment in note payable:
Dr Notes payable - Colonial House 768
Dr Interest payable - Colonial House 432
Cr Cash 1,200
Interest = $28,800 x 1.5% = $432
C) If the note payable is classified as a current liability:
Current liabilities:
Notes payable - Colonial House $23,268.49
Interest payable - Colonial House $4,331.51
