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On December 31, 2015, Milton Company acquired a computer from Hamil Corporation by issuing a $600,000...

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Accounting

On December 31, 2015, Milton Company acquired a computer fromHamil Corporation by issuing a $600,000 zero-interest-bearing note,payable in full on December 31, 2019. Milton Company’s creditrating permits it to borrow funds from its several lines of creditat 10%. The computer is expected to have a 5-year life and a$70,000 residual value.
Prepare the journal entry for the purchase on December 31, 2015 andany necessary adjusting entries relative to depreciation (usestraight-line) and amortization on December 31, 2016

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Cost of machinery is equal to present value of the zerointerestbearing note discounted using 10 cost of borrowing Present valueof zerointerest note isPresent value of zerointerest note    See Answer
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