Question

On December 31, 2020, Blossom Company acquired a computer from Plato Corporation by issuing a $650,000 zero-interest-bearing note, payable in full on December 31, 2024. Blossom 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 $76,000 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 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, 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 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

Prepare any necessary adjusting entries relative to depreciation and amortization on December 31, 2022. (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, 2022 (To record the depreciation.) December 31, 2022 (To amortize the discount.)

Answer 1

Working as follows:

Amortization Schedule
Date	Interest Expense	Carrying Amount of Note
12/31/2020		$413,087
12/31/2021	$413087 × 12% = $49570	$462,657
12/31/2022	$462,657 × 12% = $55,519	$518,176
12/31/2023	$518,176 × 12% = $62,181	$580,357
12/31/2024	$580,357 × 12% = $69,643	$650,000

_________________________________________________________________________

Prepare Journal entries for purchase as follows:

Date	Account Titles	Debit	Credit
Dec. 31, 2020	Computer Equipment [$650,000 × 0.635518	$413,087
	Discount on notes payable	$236,913
	Note payable		$650,000

Using PVF(12%, 4) = 0.635518

______________________________________________________________________________

Prepare any necessary adjusting entries relative to depreciation and amortization:

Date	Account Titles	Debit	Credit
Dec. 31, 2021	Depreciation Expense	$67,417.40
	Accumulated Depreciation- Computer equip.		$67,417.40
	($413,087-$76,000)/5 years
Dec. 31, 2021	Interest Expense	$49,570
	Discount on Notes payable		$49,570

___________________________________________________________________________

Prepare adjusting entries relative to depreciation and amortization on December 31, 2022 as follows:

Date	Account Titles	Debit	Credit
Dec. 31, 2022	Depreciation Expense	$67,417.40
	Accumulated Depreciation- Computer equip.		$67,417.40
	($413,087-$76,000)/5 years
Dec. 31, 2022	Interest Expense	$55,519
	Discount on Notes payable		$55,519