Question

On December 31, 2020, Oriole Company acquired a computer from Plato Corporation by issuing a $570,000 zero-interest-bearing note, payable in full on December 31, 2024. Oriole Company’s credit rating permits it to borrow funds from its several lines of credit at 10%. The computer is expected to have a 5-year life and a $67,000 salvage value.

A )Prepare the journal entry for the purchase on December 31, 2020. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answers to 0 decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

B) Prepare any necessary adjusting entries relative to depreciation (use straight-line) and amortization (use effective-interest method) on December 31, 2021. (Round answers to 0 decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date
Account Titles and Explanation
Debit
Credit
December 31, 2021
















(To record the depreciation.)




December 31, 2021
















(To amortize the discount.)





Schedule of Note Discount Amortization

Date


Debit, Interest Expense Credit,
Discount on Notes Payable


Carrying Amount
of Note


12/31/20


$


$


12/31/21










12/31/22










12/31/23










12/31/24

Answer 1