1) First solve the present value of the computer
FV = $595,000
I = 12%
T = 4 years
PVF(4,12) = 0.635518
Present value = ($595,000 Ă— 0.635518)
Present value = $378,133.21rounded to $378,133
|
|
Debit |
credit |
| 31- dec-2017 |
computer equipment |
$378,133
|
|
|
Discount on note payable |
$216,867 |
|
|
Note payable |
|
$595,000 |
2) to calculate depreciation expense
(Pv computer - Salvage value)
($378,133 - $75000)/5
= $ 60,626.6
|
|
Debit
|
Credit |
| 31-dec-2018 |
Depreciation expenses |
60,626.6 |
|
|
Accumulated depreciation computer |
|
60,626.6 |
|
|
|
|
| 31-dec-2018 |
interest expense |
45,375.96 |
|
|
Discount on note payable(W.N-1) |
|
45,375.96 |
Working note (W.N)
1)
| 12/31/2017 |
|
$378,133 |
| 12/31/2018 |
45,375.96 |
$423,508.96 |
| 12/31/2019 |
50,821.07 |
$474,330.03
|
| 12/31/2020 |
56,919.60 |
$531,249.63 |
| 12/31/2021 |
63,749.95 |
$595,000 (rounded) |
|
|
|
C)
|
|
Debit |
credit |
| 31-dec-2019 |
depreciation expense |
60,626.6 |
|
|
Accumulated depreciation computer |
|
60,626.6 |
|
|
|
|
| 31-dec-2019 |
interest expense |
50,821.07 |
|
|
Discount on note payable |
|
50,821.07 |
