Current Liabilities

Evans Equipment Co. Sells new and used earthmoving equipment. it uses a perpetual inventory system, and its accounting period ends December 31. On December 28, 20x1 . Evans purchased a used backhoe for resale, at an agreed price of $40,000. Terms of purchase: 1. $10,000 down payment 2. Note payable, face amount = $30,000 maturity date = 12128120x3 The company bookkeeper recorded the equipment in the perpetual inventory account at $40,000 and reported no interest expense for 20x1 because the note did not specify that any interest would be paid. In answer to a question by the newly engaged CPA. the bookkeeper said that the entry on the maturity date of the note would be a debit to notes payable and a credit to cash of $30,000. The transaction was not recorded until January 5, 20x2, because it was on that date that Evans received the equipment and the check for the downpayment was drawn