Question

CALCULATOR STANDARD VIEW PRINTER VERSION RACK NEXT On December 31, 2020, Wildhorse Company acquired a computer from Plato Corporation by issuing a 5573,000 zero-interest-bearing note, payable in full on December 31, 2024. Wildhorse 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 $70,000 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.) Date Account Titles and Explanation Debit Credit December 31, 2020 SHOW LIST OF ACCOUNTS LINK TO TEXT 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 o for the amounts. Credit account tities 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 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

Please complete this part also.

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

Requirement 1:

Date	Account title and Explanation	Debit	Credit
December 31,2020	Equipment*	$391,365
	Discount on notes payable	$181,635
	Notes payable		$573,000
	[To record acquisition of equipment in exchange of zero-interest notes]

*Equipment = $573,000 x 0.68301 present value factor (10%, 4 years) =$391,365

Requirement 2:

Date	Account title and Explanation	Debit	Credit
December 31,2021	Depreciation expense	$64,273
	Accumulated depreciation-equipment		$64,273
	[To record the depreciation]
December 31,2021	Interest expense	$39,137
	Discount on notes payable		$39,137
	[To amortize the discount]

Calculations:

i.Depreciation expense = (cost - salvage value) ÷ useful life

=(391,365-70,000)/5 years

=321,365/5

=$64,273

ii.Interest expense = Carrying amount x Interest rate

= $391,365 x 10%

=$39,137.

Requirement 3:

Schedule of note discount amortization

Date	Debit, Interest Expense Credit, Discount on Notes payable	Carrying Amount of Notes
12/31/20		$391,365
12/31/21	$39,137	$430,502
12/31/22	$43,050	$473,552
12/31/23	$47,355	$520,907
12/31/24	$52,091	$573,000

Interest expense = Preceding carrying amount x 10%

Carrying amount = preceding carrying amount + Interest expense