Aspen Mining and Milling, Inc. contracted with Raoul Corporation to have constructed a custom-made lathe. The machine was completed and ready for use on January 1, 2014. Aspen paid for the lathe by issuing a $600,000, 3-year note that specified 2% interest, payable annually on December 31 of each year. The cash market price of the lathe was unknown. Loans of this type were typically financed in the market at 10%. Aspen's incremental borrowing rate is also 10% for this type of loan.
A. Prepare the Journal entry on January 1, 2014, for Aspen Mining and Millings purchase of the lathe.
B. Prepare an amortization schedule for the 3-year term of the note.
C. Prepare the journal entries to record (a) interest for each of the 3 years and (b) payment of the note at maturity.