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 $300,000 note due in three years. Interest, specified at 2%, 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 6% was a reasonable rate of interest.
Required:
(1.) Prepare the journal entry on January 1, 2018, for Coldwater Corporation's sale of 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) receipt of payment of the note at maturity.

Question

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The Answer of 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 $300,000 note due in three years. Interest, specified at 2%, 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 6% was a reasonable rate of interest.
Required:
(1.) Prepare the journal entry on January 1, 2018, for Coldwater Corporation's sale of 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) receipt of payment of the note at maturity.