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.
The note to Pans Enterprises was paid in full.
The note to Datatex Equipment was paid in full.
Paid note to Bank of Kingsville
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