Chapter 4
Current Liabilities
177
AP-16A (
6
)
On September 1, 2017, Express Company purchased a delivery truck from MJ Trucks, costing
$80,000. However, due to cash flow problems, Express Company is currently unable to make
the payment. Therefore, to assure MJ Trucks that it will be paid, Express Company signed a
one-year note with 3% interest per annum, to be payable at maturity on August 31, 2018.
Express Company’s year-end is on December 31. Prepare all the necessary journal entries
related to the notes payable from the time it is signed to the maturity date.
Date
Account Title and Explanation
Debit
Credit
Analysis
Businesses are supposed to accrue expenses (such as interest expense) at the end of their
fiscal years to report them on their financial statements. Why do you think businesses should
not wait until cash is paid to record the expenses?
