Problem 14-8 On December 31, 2017, Pronghorn Company acquired a computer from Pl
ID: 2336456 • Letter: P
Question
Problem 14-8 On December 31, 2017, Pronghorn Company acquired a computer from Plato Corporation by issuing a $569,000 zero-interest-bearing note, payable in full on December 31, 2021 Pronghorn Company's credit rating permits it to borrow funds frem its several ines of dredit at 0% The computer is expected to have a year lie and a ses oo usage vai e Prepare the journal entry for the purchase on December 31, 2017. (Round present value factor calculations to 5 decimal places, eg, iana and the malaswer to decimal places e.g. 58,971. If no entry is required, select "No Entry for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit December 31, 2017 LIST OF ACCOUNTSExplanation / Answer
**NUmber of years (for note) = 4 years [31 dec 2017- 31 dec 2021]
present value of note =Face value * PVF 10%,4
= 569000 * .68301
= 388633
Depreciation = [cost- salvage value ]/useful life of asset
=[388633-65000]/5
= 64727
Date Account debit credit 31 dec 2017 Computer 388633 Discount on note payable 180367 Note payable 569000 Dec 31 2018 Depreciation expense 64727 Accumulated depreciation -computer 64727 Dec 31 2018 Interest expense 38863 Discount on note payable [388633*10%] 38863 dec 31 2019 Depreciation expense 64727 Accumulated depreciation -computer 64727 31dec 2019 Interest expense 42750 Discount on note payable 42750