Refer to the situation described in E 14-17. In E 14-17. Amber Mining and Milling, Inc., contracted

Question:

Refer to the situation described in E 14-17.
In E 14-17.
Amber Mining and Milling, Inc., contracted with Truax to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2018. 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.
Required:
1. Prepare the journal entry on January 1, 2018, for Truax Corporation's sale of 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 for Truax.
Corporation
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