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, 2018. Amber paid forthe lathe by issuing a $500,000, three-year note that specified 4%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 10% 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-a. Complete the table below to determine theprice of the equipment. 1-b. Prepare the journal entry on January1, 2018, for Amber Mining and Milling’s purchase of the lathe. 2.Prepare an amortization schedule for the three-year term of thenote. 3. Prepare the journal entries to record (a) interest foreach of the three years and (b) payment of the note atmaturity.
