Question

On December 31, 2020, Flounder Company acquired a computer from Plato Corporation by issuing a $592,000 zero-interest-bearing note, payable in full on December 31, 2024. Flounder Company's credit rating permits it to borrow funds from its several lines of credit at 12%. The computer is expected to have a 5-year life and a $66,000 salvage value. 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 o decimal places e.g. 58,971. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Date December 31, 2020 Prepare any necessary adjusting entries relative to depreciation (use straight-line) and amortization (use effective-interest method) on December 31, 2021. (Round answers to o decimal places, e.g. 38,548. If no entry is required, select "No Entry" for the account titles and enter o for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Debit Credit Date Account Titles and Explanation December 31, 2021 (To record the depreciation.) December 31, 2021 (To amortize the discount.) Schedule of Note Discount Amortization Debit, Interest Expense Credit Carrying Amount Discount on Notes Payable of Note Date 12/31/20 12/31/21 12/31/22 12/31/23 12/31/24

Answer 1

	Journal Entries
Date	Account Title & Explanation	Debit ($)	Credit ($)
31/12/2020	Computer ($592000 x 0.63552)	376228
	Discount on notes payable	215772.16
	Notes payable		592000
	Schedule of Notes Discount Amortization
Date	Debit, Interest expense credit, Discount on Notes payable	Carrying value
31/12/2020		376228
31/12/2021	45147.36	421375.36
31/12/2022	50565.0432	471940.4032
31/12/2023	56632.84838	528573.2516
31/12/2024	63428.79019	592002.0418
Date	Account Title & Explanation	Debit ($)	Credit ($)
31/12/2021	Depreciation Expenses [(376228 - 66000) / 5]	62046
	Accumulated Depreciation		62046
31/12/2021	Interest Expenses	45147
	Discount on Notes payable		45147
Date	Account Title & Explanation	Debit ($)	Credit ($)
31/12/2022	Depreciation Expenses	62046
	Accumulated Depreciation		62046
31/12/2022	Interest Expenses	50565
	Discount on Notes payable		50565