Exercise 14-18 (Static) Note with unrealistic interest rate; lender; amortization schedule [LO14-3] Amber Mining and Milling, Inc., contracted with Truax Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2021. 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. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: 1-a. Complete the below table to prepare the company's journal entry. 1-b. Prepare the journal entry on January 1, 2021, for Truax Corporation's sale of the lathe. Assume Truax spent $400,000 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. Answer is not complete. Complete this question by entering your answers in the tabs below. Req 1A Req 1B Req 2 Req 3 Complete the below table to prepare the company's journal entry. (Round final answers to the nearest whole dollar.) Table values are based on: n = 3 i= 12.0% Present Cash Flow Amount Value Interest $ 24,000 $ 57,643 Principal $ 600,000 427,080 Price of equipment $ 484,723 Req 1A Req 1B Req 2 Req 3 View transaction list Prepare the journal entry on January 1, 2021, for Truax Corporation's sale of the lathe. Assume Truax spent $400,000 to construct the lathe. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round intermediate calculations and final answers to the nearest whole dollar.) Journal entry worksheet 1 2 Record the entry for Truax Corporation's sale of the lathe. No Date General Journal Debit Credit 1 January 01, 2021 No journal entry required Req 1A Req 1B Req 2 Req 3 Prepare the journal entry on January 1, 2021, for Truax Corporation's sale of the lathe. Assume Truax spent $400,000 to construct the lathe. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round intermediate calculations and final answers to the nearest whole dollar.) View transaction list Journal entry worksheet 1 2 Record the cost of the lathe. 2 January 01, 2021 Equipment Discount on notes payable Notes payable 484,723 x 115,277 600,000 Req 1A Req 1B Req 2 Req 3 Prepare an amortization schedule for the three-year term of the note. (Round intermediate calculations and final answers to the nearest whole dollar.) Cash Payment Effective Interest Increase in Balance Outstanding Balance $ 484,723 - $ 24,000 $ 58,167 $ 34,167 450,556 2 24,000 54,067 x 30,067 480,623 3 24,000 143,377 119,377 600,000 Total $ 72,000 $ 255,611 $ 183,611 Journal entry worksheet 1 2 3 4 Record the interest in year 1. 1 No Event 1 Interest expense General Journal Debit Credit 58,167 34,167 24,000 Discount on notes payable Cash Journal entry worksheet 1 2 3 4 Record the interest in year 2. 2 2 Interest expense 54,067 Discount on notes payable 30,067 Cash 24,000 Journal entry worksheet 1 2 Record the interest in year 3. 4 3 3 Interest expense Discount on notes payable Cash 50,459 26,459 x 24,000 Journal entry worksheet 1 2 3 Record the payment of the note at maturity. 4 4 Notes payable Cash 600,000 600,000