Chapter 4
Current Liabilities
194
AP-9B (
6
)
On November 1, 2016, Compression Company signed a $100,000, eight-month note payable
with a 5% interest rate. Compression Company has a December 31 year-end.
Required
Prepare the necessary journal entries to record the following.
a) The signing of the note payable on November 1, 2016
b) The required adjusting entry on December 31, 2016
c) The payment of interest and repayment of the note on July 1, 2017
Date
Account Title and Explanation
Debit
Credit
Analysis
The accounting practice of estimating and recording accrued expense is part of accrual-based
accounting. This process is different from cash-based accounting, which is an accounting
practice that records expenses and revenue only when cash is paid or received. What benefit
does accrual-based accounting have over cash-based accounting?
