NON CURRENT LIABILITIES

• BOND PAYABLE
• LONG TERM NOTES PAYABLE
• SPECIAL ISSUES
• (Entries and Questions for Bond
Transactions) On June 30, 2012, Mackes
Company issued $5,000,000 face value of
13%, 20-year bonds at $5,376,150, a yield of
12%. Mackes uses the effective-interest
method to amortize bond premium or
discount. The bonds pay semiannual interest
on June 30 and December 31.
On December 31, 2014, Faital Company acquired a computer from Plato
Corporation by issuing a $609,300 zero-interest-bearing note, payable in
full on December 31, 2018. Faital 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 $71,800 salvage value.

(a) Prepare the journal entry for the purchase on December 31, 2014

(b) Prepare any necessary adjusting entries relative to depreciation (use

straight-line) and amortization (use effective-interest method) on
December 31, 2015
(Entries for Zero-Interest-Bearing Note; Payable in
Installments) Sabonis Cosmetics Co. purchased machinery on
December 31, 2011, paying $50,000 down and agreeing to pay
the balance in four equal install- ments of $40,000 payable
each December 31. An assumed interest of 8% is implicit in the
purchase price.
Instructions
Prepare the journal entries that would be recorded for the
purchase and for the payments and interest on the following
dates.
(a) December 31, 2011. (d) December 31, 2014. (b) December
31, 2012. (e) December 31, 2015. (c) December 31, 2013.
EQUITY