Holly Springs, Inc. contracted with Coldwater Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2018. Holly Springs paid for the lathe by issuing a $230,000 note due in three years. Interest, specified at 3%, was 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 for which 7% was a reasonable rate of interest. Holly Springs uses the effective interest method of amortization. (FV of $1,PV of $1,FVA of $1,PVA of $1,FVAD of $1andPVAD of $1)(Use appropriate factor(s) from the tables provided. Round your intermediate and final answers to the nearest whole dollar.)

Required:

1.Prepare the journal entry on January 1, 2018, for Holly Springs' purchase of the lathe.

2.Prepare the 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.