INSTALLMENT SALE Jeffrey’s Billiards sold a pool table to C. Cobbs on October 31, 2009. The terms of the sale are no money down and payments of $50 per month for 30 months, with the first payment due on November 30, 2009. The table they sold to Cobbs cost Jeffrey’s $800.

Jeffrey’s uses an interest rate of 12 percent compounded monthly (1 percent per month).

Required:

. Prepare the cash flow diagram for this sale.

. Calculate the amount of revenue Jeffrey’s should record on October 31, 2009.

. Prepare the entry to record the sale on October 31.

Assume that Jeffrey’s records cost of goods sold at the time of the sale (perpetual inventory accounting).

. Determine how much interest revenue Jeffrey’s will record from October 31, 2009, through December 31, 2009.

. Determine how much Jeffrey’s 2009 income before taxes increased by this sale.