Holly Springs, Incorporated contracted with Coldwater Corporation to have constructed a custom-made lathe. The machine was...

Transcribed Image Text:

Holly Springs, Incorporated contracted with Coldwater Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2024. Holly Springs paid for the lathe by issuing a $330,000 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. Holly Springs uses the effective interest method of amortization. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1, FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Required: 1. Prepare the journal entry on January 1, 2024, for Holly Springs' purchase 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) payment of the note at maturity. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare the journal entry on January 1, 2024, for Holly Springs' purchase of the lathe. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar. View transaction list Journal entry worksheet < 1 Record for the Holly Springs' purchase on January 1, 2024. Note: Enter debits before credits. Date January 01, 2024 General Journal Debit Credit Holly Springs, Incorporated contracted with Coldwater Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2024. Holly Springs paid for the lathe by issuing a $330,000 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. Holly Springs uses the effective interest method of amortization. Note: Use tables, Excel, or a financial calculator. (FV of $1. PV of $1, FVA of $1. PVA of $1. FVAD of $1 and PVAD of $1) Required: 1. Prepare the journal entry on January 1, 2024, for Holly Springs' purchase 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) payment of the note at maturity. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare the journal entry on January 1, 2024, for Holly Springs' purchase of the lathe. Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate and final answers to nearest whole dollar. View transaction list Journal entry worksheet < 1 Record for the Holly Springs' purchase on January 1, 2024. Note: Enter debits before credits. Date January 01, 2024 General Journal Debit Credit

Answer rating: 100% (QA)

Answer To prepare the journal entry on January 1 2024 for Hol... View the full answer