On December 31, 2014, Faital Company acquired a computer from Plato Corporation by issuing a $626,300 zero-interest-bearing note, payable in full on December 31, 2018. Faital 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 $78,800 salvage value.
(a) Prepare the journal entry for the purchase on December 31, 2014.
(b) Prepare any necessary adjusting entries relative to depreciation (use straight-line) and amortization (use effective-interest method) on December 31, 2015.
(c) Schedule of Note Discount Amortization
(d) Prepare any necessary adjusting entries relative to depreciation and amortization on December 31, 2016.