January 31, 2009 - Company A decides to purchase a new delivery vehicle. The cost, in dollars, is $104,500. They take out a 5-year "note" to pay for the vehicle, with 4% interest due each year on January 31. December 31, 2009 - On January 31, 2009, Company A purchased a truck. Record any necessary adjusting entries for the note used to pay for the truck. I am confused on how to document this adjusting entry. Would it be debit notes payable credit equipment expense (<-- I'm not even sure if this is the right account??) and then debit interest payable credit interest expense since 12/31/2009 is before 1/31/2010? And thus they wouldn't have paid it yet in cash but both the note & interest is incurred as a payable?
January 31, 2009 - Company A decides to purchase a new delivery vehicle. The cost, in dollars, is $104,500. They take out a 5-year "note" to pay for the vehicle, with 4% interest due each year on January 31.
December 31, 2009 - On January 31, 2009, Company A purchased a truck. Record any necessary
I am confused on how to document this adjusting entry. Would it be debit notes payable credit equipment expense (<-- I'm not even sure if this is the right account??) and then debit interest payable credit interest expense since 12/31/2009 is before 1/31/2010? And thus they wouldn't have paid it yet in cash but both the note & interest is incurred as a payable?
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