Question

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 $450,000, three-year note that specified 6% 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 orporation's sale of the lathe. Assume Truax spent $250,000 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. X Answer is not complete. Complete this question by entering your answers in the tabs below. Reg 1A Req 1B Reg 2 Req3 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 = 6.0% 3 X $ Cash Flow Amount Interest $ 27,000 Principal $ 450,000 Price of equipment Present Value 23,194 X 357,224 % 380,418 $ < Req 1A Req 1B >

Table factors are online.

Answer 1

n =	3
I =	12%
Cash Flow	Amount	Present Value
Interest	$       27,000	$     3,20,301
Principal	$    4,50,000	$        64,849
		$     3,85,150

Date	Account Titles	Debit	Credit
Jan-01	Notes Receivable	$    4,50,000
	Sales Revenue		$     3,85,150
	Discount on notes receivable		$        64,850
	(Sale of machine)
	Cost of Goods Sold	$    2,50,000
	Inventory		$     2,50,000
	(Cost of goods sold)

Date	Account Titles	Debit	Credit
1	Cash	$       27,000
	Discount on Notes receivable	$       19,218
	Interest Revenue		$        46,218
2	Cash	$       27,000
	Discount on Notes receivable	$       21,524
	Interest Revenue		$        48,524
3	Cash	$       27,000
	Discount on Notes receivable	$       24,108
	Interest Revenue		$        51,108
4	Cash	$    4,50,000
	Notes Receivable		$     4,50,000