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
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