Question

Swifty Corporation purchased a computer on December 31 2016 for $119,700 ing $34,200 down and agreeing to pay the balance in five equal installments of $17,100 payable each December 31 beginning in 2017. An assumed interest rate of 8% s mplicit in the purchase price he Purchase priced comp Prepare the journal entry at the date of purchase. (Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts Date Account Titles and Explanation Debit Credit December 31, 2016 SHOW LIST OF ACCOUNTS LINK TO TEXT Prepare the journal entry at December 31, 2017, to record the payment and interest (effective-interest method employed). (Round answers to 0 decimal places, e.g. 5,275. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account tities and enter 0 for the amounts.) c T no entry re No ntry for th Do not inde nt titles end emal enter O for Date Account Titles and Explanation Debit Credit December 31, 2017

Answer 1

Hi

Let me know in case any issue and query:

As interest is applied it will be treated as zero coupon bond:

Naming convention is not available, can be slightly differnet: Solution: ournal entries Date Account title and explaination Debit Credit Dec.31 Equipment (computer) 2016 (34200)+(17100 3.99271) (plug) (17100*5) 102475 $ 17,225 Discount on Notes payable Notes Payable Cash To record the purchase of computer) $85,500 $34,200 Dec.31 Note payable 2017 $ 17,100 $ 5,462 Interest expense Discount on Notes payable Cash refer Schedule below) $ 5,462 $17,100 Dec.31 Note payable 2018 $ 17,100 $ 4,531 Interest expense Discount on Notes payable Cash refer Schedule below) $ 4,531 $17,100 Decrease in Carrying notesInterest Installment amount Note period yable xp Payment $ 68,275 (17100*3.99271) Dec.31,2016 Dec.31,2017 $ 11,638 $ 5,462$ 17,100 $ 56,637 Dec.31,2018 12,569 $ 4,531 17,100 $ 44,068 Dec.31,2019 $ 13,575 $ 3,525 $ 17,100 $ 30,494 Dec.31,2020 14,660 $ 2,440 17,100 $ 15,833 Dec.31,2021 15,833 $ 1,267 17,100 $0