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
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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8
Transcribed Image Text: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.
Note: Use tables, Excel, or a financial calculator. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)
Complete this question by entering your answers in the tabs below.
Req 1A
Table values are based on:
Cash Flow
Interest
Principal
Req 1B
Complete the table below to determine the price of the equipment.
Note: Round final answers to the nearest whole dollar.
n =
j=
Amount
Req 2
Price of equipment
Req 3
%
Present Value
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