Question:
Red Bank Enterprises was involved in the subsequent transactions in the fiscal year ending October 31:
8/2: Borrowed $75,000 from the Bank of Kingsville by signing a 120-day, 12% note.
8/20: Issued a $40,000 note to Harris Motors for the buy of a $40,000 delivery truck. The note is due in 180 days and carries a 12 percent interest rate.
9/10: Purchased inventory from Pans Enterprises in the amount of $15,000. Issued a 30-day, 12 percent note in settlement of the balance owed.
9/11: Issued a $60,000 note to Datatec Equipment in settlement of an overdue account payable of the same amount. The note is due in 30 days and carries a 14 percent interest rate.
10/10: The note to Pans Enterprises was paid in full.
10/11: The note to Datatex Equipment was paid in full.
11/30: Paid note to Bank of Kingsville
Instructions
a. Organize journal entries to record the transactions.
b. Purpose adjusting entries on December 31 to record accrued interest (daily interest is evaluated utilizing the 360 day method).
c. Purpose the Current Liability section of Red Bank's balance sheet as of December 31. Consider that the Accounts Payable account totals $203,600 on this date.