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garik1379 [7]
3 years ago
7

On December 31, 2010, Faital Company acquired a computer from Plato Corporation by issuing a $600,000 zero-interest-bearing note

, payable in full on December 31, 2014. Faital 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.
(a) Prepare the journal entry for the purchase on December 31, 2010.
(b) Prepare any necessary adjusting entries relative to depreciation (use straight-line) and amortization (use effective-interest method) on December 31, 2011.
(c) Prepare any necessary adjusting entries relative to depreciation and amortization on December 31, 2012.
Business
1 answer:
kolbaska11 [484]3 years ago
5 0

Answer:

Journal Entry to record the transaction

                                             Dr.                Cr.

(a) Dec 31 , 2010

Computer                      $600,000

Note payable                                   $600,000

(b) Dec 31 , 2011

Depreciation Expense  $106,000

Accumulated Depreciation            $106,000

(b) Dec 31 , 2012

Depreciation Expense  $106,000

Accumulated Depreciation            $106,000

Explanation:

Depreciation = ( $600,000 - $70,000 ) / 5 = $106,000

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