ACC 205 Week 4 Exercise 3 Notes payable

3. Notes payable.Red Bank Enterprises was involved in the following transactions during the fiscal

year ending October 31:

8/2: Borrowed $55,000 from the Bank of Kingsville by signing a 90-day, 12% note.

12/1 Borrowed $10,000 from the First City Bank by signing a 3- month, 15% note payable.

Interest and principal are due at maturity.

2/10 Established a warranty liability for the XY-80, a new product. Sales are expected to total

1,000 units during the month. Past experience with similar products indicates that 3% of

the units will require repair, with warranty costs averaging $27 per unit (parts only).

12/22 Purchased $16,000 of merchandise on account from Oregon Company, terms 2/10, n/30.

12/26 Borrowed $5,000 from First City Bank; signed a 15% note payable due in 60 days.

(Assume 360 day year for interest)

12/31 Repaired six XY-80s during the month at a total cost of $162.

12/31 Accrued 3 days of salaries at a total cost of $1,400.

8/20: 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 rate.

9/10: Purchased merchandise from Pans Enterprises in the amount of $15,000. Issued a 30-

day, 12% note in settlement of the balance owed.

9/11: 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.

10/10:

10/11

11/30

The note to Pans Enterprises was paid in full.

The note to Datatex Equipment was paid in full.

Paid note to Bank of Kingsville