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, 2013. Amber paid for the lathe by issuing a $600,000, 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 10% was a reasonable rate of interest. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
Complete the below table to prepare the company's journal entry.
Prepare an amortization schedule for the three-year term of the note.
Prepare the journal entries to record (a) interest for each of the three years and (b) payment of the note at maturity
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