Amber Mining and Milling, Inc., contracted with Truax Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2021. Amber paid for the lathe by issuing a $600,000, three-year note that specified 4% interest, payable annually on December 31 of each year. The cash market price of the lathe was unknown. It was determined by comparison with similar transactions that 12% was a reasonable rate of interest. (FV of $1, PV of $1. FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Complete the table below to determine the price of the equipment. 1-b. Prepare the journal entry on January 1, 2021, for Amber Mining and Milling's purchase of the lathe. 3 2. Prepare an amortization schedule for the three-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 at maturity. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3 Complete the table below to determine the price of the equipment. (Round final answers to the nearest whole dollars.) Table values are based on: n = i = Cash Flow Amount Present Value Interest Principal Price of equipment Req 1A Req 1B >
Amber Mining and Milling, Inc., contracted with Truax Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2021. Amber paid for the lathe by issuing a $600,000, three-year note that specified 4% interest, payable annually on December 31 of each year. The cash market price of the lathe was unknown. It was determined by comparison with similar transactions that 12% was a reasonable rate of interest. (FV of $1, PV of $1. FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Complete the table below to determine the price of the equipment. 1-b. Prepare the journal entry on January 1, 2021, for Amber Mining and Milling's purchase of the lathe. 3 2. Prepare an amortization schedule for the three-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 at maturity. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3 Complete the table below to determine the price of the equipment. (Round final answers to the nearest whole dollars.) Table values are based on: n = i = Cash Flow Amount Present Value Interest Principal Price of equipment Req 1A Req 1B >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Amber Mining and Milling, Inc., contracted with Truax Corporation to have constructed a custom-made lathe. The machine was
completed and ready for use on January 1, 2021. Amber paid for the lathe by issuing a $600,000, three-year note that specified 4%
interest, payable annually on December 31 of each year. The cash market price of the lathe was unknown. It was determined by
comparison with similar transactions that 12% was a reasonable rate of interest. (FV of $1, PV of $1. FVA of $1, PVA of $1, FVAD of $1
and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Required:
1-a. Complete the table below to determine the price of the equipment.
1-b. Prepare the journal entry on January 1, 2021, for Amber Mining and Milling's purchase of the lathe.
3
2. Prepare an amortization schedule for the three-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 at maturity.
Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
Req 2
Req 3
Complete the table below to determine the price of the equipment. (Round final answers to the nearest whole dollars.)
Table values are based on:
n =
i =
Cash Flow
Amount
Present Value
Interest
Principal
Price of equipment
Req 1A
Req 1B >
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