Problem 14-8

On December 31, 2017, Vaughn Company acquired a computer from Plato Corporation by issuing a $609,000 zero-interest-bearing note, payable in full on December 31, 2021. Vaughn Companys 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 $63,000 salvage value.

Prepare the journal entry for the purchase on December 31, 2017.

Date	Account Title	Debit	Credit
12/31/17

Prepare any necessary adjusting entries relative to depreciation (use straight-line) and amortization (use effective-interest method) on December 31, 2018.

Date	Account Title	Debit	Credit
12/31/18
	(To record the depreciation)
12/31/18
	(To amortize the discount)

	Schedule of Note Discount Amortization
Date	Debit, Interest Expense Credit, Discount on NP	Carrying Amount of Note
12/31/17
12/31/18
12/31/19
12/31/20
12/31/21

Prepare any necessary adjusting entries relative to depreciation and amortization on December 31, 2019.

Date	Account Title	Debit	Credit
12/31/19
	(To record the depreciation.)
12/31/19
	(To amortize the discount.)