Patrice Wall Accounting Inc. takes advantage of a well-known office furnishings store’s low interest rate financing. Patrice buys furniture on the first day of its fiscal year, signing a $10,000, three-year note. The note is payable in full at maturity. Interest is payable annually at 2%. The market rate of interest for similar transactions is 4%.

Required:

Prepare journal entries to record:
a. The purchase of the office furniture.
b. The payment of interest and related amortization of the discount at the end of Year 1.