Hornet Motors purchased a custom-made metal press for use in repairing wrecked cars. The press was installed on January 2, 2018. The press had no known market value. Hornet agreed to pay $300,000 on December 31, 2020 and asked for a 3% interest rate. At the time, Hornet's incremental borrowing rate was 7%. The seller agreed to the terms and requested interest payments on December 31 each year.
Required:
1. Compute the selling price of the machine.
2. Prepare the three-year amortization table for the note payable.
3. Prepare the journal entries to record the purchase of the machine, the first annual interest payment, and the final payment of interest and principal.

Question

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The Answer of Hornet Motors purchased a custom-made metal press for use in repairing wrecked cars. The press was installed on January 2, 2018. The press had no known market value. Hornet agreed to pay $300,000 on December 31, 2020 and asked for a 3% interest rate. At the time, Hornet's incremental borrowing rate was 7%. The seller agreed to the terms and requested interest payments on December 31 each year.
Required:
1. Compute the selling price of the machine.
2. Prepare the three-year amortization table for the note payable.
3. Prepare the journal entries to record the purchase of the machine, the first annual interest payment, and the final payment of interest and principal.

Hornet Motors Purchased a Custom-Made Metal Press for Use in Repairing