On December 31, 2017, Pharoah Company acquired a computer from Plato Corporation
ID: 2409800 • Letter: O
Question
On December 31, 2017, Pharoah Company acquired a computer from Plato Corporation by issuing a $597,000 zero-interest-bearing note, payable in full on December 31, 2021. Pharoah 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 $72,000 salvage value.
Prepare the journal entry for the purchase on December 31, 2017. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer 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.)
Date
Account Titles and Explanation
Debit
Credit
December 31, 2017
Prepare any necessary adjusting entries relative to depreciation (use straight-line) and amortization (use effective-interest method) on December 31, 2018. (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, 2018
(To record the depreciation.)
December 31, 2018
(To amortize the discount.)
PREPARE SCHEDULE OF DISCOUNT AMORTIZATION
Prepare any necessary adjusting entries relative to depreciation and amortization on December 31, 2019. (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, 2019
(To record the depreciation.)
December 31, 2019
(To amortize the discount.)
Date
Account Titles and Explanation
Debit
Credit
December 31, 2017
Explanation / Answer
Journal Entry for the purchase: 31-Dec-17 Computer 597000 Discount on NP 226263 Note Payable 370737 ($597000*pvif(10%,5)=597000*0.621=370737) Adjusting entries to depreciation and amortization on Dec 31, 2018: Debit $ Credit $ 31-Dec-18 Depreciation exp 105000 Acc. Dep. - Computer 105000 (597000-72000) / 5 = 105000) 31-Dec-18 Interest Expense 37074 Discount on NP 37074 (370737*10%=37074) Adjusting entries to depreciation and amortization on Dec 31, 2019: 31-Dec-19 Depreciation exp 105000 Acc. Dep. - Computer 105000 (597000-72000) / 5 = 105000) 31-Dec-19 Interest Expense 40781 Interest Expense 40781 [(370737+37074)*10%]=40781)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.