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 Corporation's sale of the lathe. Assume Truax spent $250,000 to construct the lathe. 2. Prepare an amortization schedule for the three-vear 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. Complete this question by entering your answers in the tabs below. Reg 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 $ 1 $ $ $ 19 218 27,000 27,000 27,000 81,000 46,218 48,524 51,108 145,850 19,218 21,524 24,108 64,850 385,150 404,368 425,892 450,000 000 Total $ $ $

Numbers are right, I just need help with journal entries in requirement 1b and 3,

Answer 1

Amber Mining and Milling, Inc., Requirement 1A Journal Enteries Date Particulars 1.1.2021 Equipment a/c Dr. Discount on Notes Payable a/c Dr. To Notes Payable Debit in $ Credit in $ 385150 64850 450000 Requirement 3 Journal Enteries Trans. Particulars Debit in $ Credit in $ Interest Expense a/c Dr. 46218 To Discount on Notes Payable 19218 To Cash 27000 48524 Interest Expense a/c Dr. To Discount on Notes Payable To Cash 21524 27000 51108 Interest Expense a/c Dr. To Discount on Notes Payable To Cash 24108 27000 Dr. 450000 Notes Payable a/c To Cash 450000