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 $500,000, three-year note that specified 5% 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 8% 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 Amber Mining and Millings purchase 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 maturity.

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)