On December 31, 2015, Faital Company acquired a computer from Plato Corporation by issuing a £600,000 zero-interest-bearing note, payable in full on December 31, 2019. 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 residual value.

Instructions

(a) Prepare the journal entry for the purchase on December 31, 2015.

(b) Prepare any necessary adjusting entries relative to depreciation (use straight-line) and amortization on December 31, 2016.

(c) Prepare any necessary adjusting entries relative to depreciation and amortization on December 31, 2017