Transcribed Image Text
Amber Mining and Milling, Inc., contracted with TruaxCorporation to have constructed a custom-made lathe. The machinewas completed and ready for use on January 1, 2021. Amber paid forthe lathe by issuing a $500,000, three-year note that specified 5%interest, payable annually on December 31 of each year. The cashmarket price of the lathe was unknown. It was determined bycomparison with similar transactions that 11% was a reasonable rateof interest. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1and PVAD of $1) (Use appropriate factor(s) from the tablesprovided.)Required:1-b. Prepare the journal entry on January 1, 2021,for Truax Corporation’s sale of the lathe. Assume Truax spent$300,000 to construct the lathe.2. Prepare an amortization schedule for thethree-year term of the note.3. Prepare the journal entries to record (a)interest for each of the three years and (b) payment of the note atmaturity for Truax.Prepare an amortization schedule for the three-year term of thenote. (Round intermediate calculations and final answers to thenearest whole dollar.)Cash PaymentEffective InterestIncrease in BalanceOutstanding Balance123Total