On December 31, 2017, Ayayai Company acquired a computer from Plato Corporation by issuing a $595,000 zero-interest-bearing note, payable in full on December 31, 2021. Ayayai 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 $75,000 salvage value.
Prepare the journal entry for the purchase on December 31, 2017.
Prepare any necessary adjusting entries relative to depreciation (use straight-line) and amortization (use effective-interest method) on December 31, 2018.