Amber Mining and Milling inc contracted with Truax Corporation to constructed a custom-made lathe. The machine was completed and ready for use on Jan. 1, 2016. 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 transaction that 12% was a reasonable rate of interest?