Amber Mining and Milling, Incorporated, contracted with Truax Corporation to have constructed a custom-made lathe. • The machine was completed and ready for use on January 1, 2024. • Amber paid for the lathe by issuing a $450,000, three-year note that specified 6% 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. Required: 1-a. Complete the table below to determine the price of the equipment. 1-b. Prepare the journal entry on January 1, 2024, for Truax Corporation's sale of the lathe. Assume Truax spent $250,000 to construct the lathe. 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 for Truax. Noto: Leo tablos Excolor a financial calculator (FV of $1. DV of $1 EVA of $1 PVA of $1 EVAD of $1 and PVAD of $11

Amber Mining and Milling, Incorporated, contracted with Truax Corporation to have constructed a custom-made lathe. • The machine was completed and ready for use on January 1, 2024. • Amber paid for the lathe by issuing a $450,000, three-year note that specified 6% 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. Required: 1-a. Complete the table below to determine the price of the equipment. 1-b. Prepare the journal entry on January 1, 2024, for Truax Corporation's sale of the lathe. Assume Truax spent $250,000 to construct the lathe. 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 for Truax. Noto: Leo tablos Excolor a financial calculator (FV of $1. DV of $1 EVA of $1 PVA of $1 EVAD of $1 and PVAD of $11

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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