Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ending O?Notes payable. Red Bank Enterprises was involved in the following transactions during the fiscal year ending October 31: 2-Aug: Borrowed $55,000 from the Bank of Kingsville by signing a 90-day, 12% note. 20-Aug: Issued a $50,000 note to Harris Motors for the purchase of a $50,000 delivery truck. The note is due in... |
2-Aug: Borrowed $55,000 from the Bank of Kingsville by signing a 90-day, 12% note.
Dr Cash 55,000
Cr Notes Payable 55,000
20-Aug: Issued a $50,000 note to Harris Motors for the purchase of a $50,000 delivery truck. The note is due in 180 days and carries a 12% interest r ate.
Dr Delivery Truck 50,000
Cr Notes Payable 50,000
10-Sep: Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12% note in settlement of the balance owed.
Dr Merchandise Inventory 15,000
Cr Notes Payable 15,000
11-Sep: Issued a $60,000 note to Datatex Equipment in settlement of an overdue account payable of the same amount. The note is due in 30 days and carries a 14% interest rate.
Dr Accounts Payable 60,000
Cr Notes Payable 60,000
10-Oct: The note to Pans Enterprises was paid in full.
Dr Notes Payable 15,000
Dr Interest Expense 150 ($15,000 x 1%)
Cr Cash 15,150
11-Oct: The note to Datatex Equipment was paid in full.
Dr Notes Payable 60,000
Dr Interest Expense 700
Cr Cash 60,700
30-Oct: Paid note to Bank of Kingsville.
Dr Notes Payable 55,000
Dr Interest Expense 1,650
Cr Cash 56,650
b. Prepare adjusting entries on December 31 to record accrued interest. (Daily interest is calculated utilizing the 360 day method).
Dr Interest expense 2,233
Cr Interest Payable 2,233
c. Prepare the Current Liability section of Red Bank’s balance sheet as of December 31. Assume that the Accounts Payable account totals $203,600 on this date.
Accounts Payable 203,600
Notes Payable 50,000
Interest Payable 2,233
Total Current Liabilities $255,833
