On December 31, 2017, Sheridan Company acquired a computer fromPlato Corporation by issuing a...

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Accounting

On December 31, 2017, Sheridan Company acquired a computer fromPlato Corporation by issuing a $595,000 zero-interest-bearing note,payable in full on December 31, 2021. Sheridan Company’s creditrating permits it to borrow funds from its several lines of creditat 12%. The computer is expected to have a 5-year life and a$75,000 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 noentry is required, select "No Entry" for the account titles andenter 0 for the amounts. Credit account titles are automaticallyindented when amount is entered. Do not indent manually.)
Date
Account Titles and Explanation
Debit
Credit
December 31, 2017
SHOW LIST OF ACCOUNTS
LINK TO TEXT
Prepare any necessary adjusting entries relative to depreciation(use straight-line) and amortization (use effective-interestmethod) on December 31, 2018. (Round answers to 0 decimal places,e.g. 38,548. If no entry is required, select "No Entry" for theaccount titles and enter 0 for the amounts. Credit account titlesare automatically indented when amount is entered. Do not indentmanually.)
Date
Account Titles and Explanation
Debit
Credit
December 31, 2018
(To record the depreciation.)
December 31, 2018
(To amortize the discount.)
Schedule of Note Discount Amortization
Date
Debit, Interest Expense Credit,
Discount on Notes Payable
Carrying Amount
of Note
12/31/17 $
$
12/31/18
12/31/19
12/31/20
12/31/21
SHOW LIST OF ACCOUNTS
LINK TO TEXT
Prepare any necessary adjusting entries relative to depreciationand amortization on December 31, 2019. (Round answers to 0 decimalplaces, e.g. 38,548. If no entry is required, select "No Entry" forthe account titles and enter 0 for the amounts. Credit accounttitles are automatically indented when amount is entered. Do notindent manually.)
Date
Account Titles and Explanation
Debit
Credit
December 31, 2019
(To record the depreciation.)
December 31, 2019
(To amortize the discount.)
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Answer & Explanation Solved by verified expert

4.2 Ratings (514 Votes)

present worth of zero interest bearing note = Face value *PVF12%,4

= 595000* .63552

= $ 378134.40 [ROUNDED TO 378134]

Discount on note = 595000-378134 = 216866

Date	Account	Debit	credit
Dec 31 2017	Computer	378134
	Discount on note payable	216866
	Note payable		595000

December 31 2018	Depreciation expense	60627
	Accumulated depreciation-computer		60627
	[depreciation receorded]

31 dec 2018	Interest expense	45376
	Discount on note payable [378134*.12]		45376
	[being discount amortised ,carrying value of note 378134 *rate 12%]


31 dec 2019	depreciation expense	60627
	Accumulated depreciation-computer		60627

31 dec 2019	Interest expense	50821
	Discount on note payable [423510*12%]		50821

Depreciation =[cost-salvage ]/useful life

=[378134-75000]/5

= 60626.8 [rounded to 60627]

**carrying value at dec 31 2018 = 378134+45376 discount amortised in 2018 = 423510

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Transcribed Image Text

In: AccountingOn December 31, 2017, Sheridan Company acquired a computer fromPlato Corporation by issuing a $595,000...On December 31, 2017, Sheridan Company acquired a computer fromPlato Corporation by issuing a $595,000 zero-interest-bearing note,payable in full on December 31, 2021. Sheridan Company’s creditrating permits it to borrow funds from its several lines of creditat 12%. The computer is expected to have a 5-year life and a$75,000 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 noentry is required, select "No Entry" for the account titles andenter 0 for the amounts. Credit account titles are automaticallyindented when amount is entered. Do not indent manually.)DateAccount Titles and ExplanationDebitCreditDecember 31, 2017SHOW LIST OF ACCOUNTSLINK TO TEXTPrepare any necessary adjusting entries relative to depreciation(use straight-line) and amortization (use effective-interestmethod) on December 31, 2018. (Round answers to 0 decimal places,e.g. 38,548. If no entry is required, select "No Entry" for theaccount titles and enter 0 for the amounts. Credit account titlesare automatically indented when amount is entered. Do not indentmanually.)DateAccount Titles and ExplanationDebitCreditDecember 31, 2018(To record the depreciation.)December 31, 2018(To amortize the discount.)Schedule of Note Discount AmortizationDateDebit, Interest Expense Credit,Discount on Notes PayableCarrying Amountof Note12/31/17 $$12/31/1812/31/1912/31/2012/31/21SHOW LIST OF ACCOUNTSLINK TO TEXTPrepare any necessary adjusting entries relative to depreciationand amortization on December 31, 2019. (Round answers to 0 decimalplaces, e.g. 38,548. If no entry is required, select "No Entry" forthe account titles and enter 0 for the amounts. Credit accounttitles are automatically indented when amount is entered. Do notindent manually.)DateAccount Titles and ExplanationDebitCreditDecember 31, 2019(To record the depreciation.)December 31, 2019(To amortize the discount.)Click if you would like to Show Work for this question:Open Show Work