Entries for zero-interest-bearing note


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.

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Accounting Basics: Entries for zero-interest-bearing note
Reference No:- TGS084418

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