[ctyson]

I'm having a difficult time figuring all this out. Can someone please check my work and let me know if my answers are correct?

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 180 days and carries a 12% interest r ate.
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.
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.
10-Oct: The note to Pans Enterprises was paid in full.
11-Oct: The note to Datatex Equipment was paid in full.
30-Oct: Paid note to Bank of Kingsville.

Instructions
a. Prepare journal entries to record the transactions.

2-Aug Cash $ 55,000
Notes Payable $ 55,000
20-Aug Equipment $ 50,000
Notes Payable $ 50,000
10-Sept Inventory $ 15,000
Notes Payable $ 15,000
11-Sept Accounts Payable $ 60,000
Notes Payable $ 60,000
10-Oct Interest Expense $ 150
Notes Payable $ 15,000
Cash $ 15,150
11-Oct Interest Expense $ 700
Notes Payable $ 60,000
Cash $ 60,700
30-Oct Interest Expense $ 1,650
Notes Payable $ 55,000
Cash $ 56,650

b. Prepare adjusting entries on December 31 to record accrued interest. (Daily interest is calculated utilizing the 360 day method).

31-Dec Interest Expense $ 3,000
Interest Payable $ 3,000

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.

Current Liabilities
Accounts Payable $ 203,600
Interest Payable $ 3,000
Notes Payable $ 50,000
Total Current Liabilities $ 256,600

[pready]

Your journal entries are correct.

The amount for adjusting entry is incorrect. You have only one note payable that is still outstanding. It is the 20 Aug transaction to Harris Motors. First you have to calculate the number of days from 20 Aug to 31 Dec, which is 133 days. Now take the principal amount of the note times the percentage rate of 12% times 133/360 days to get your interest expense and interest payable amount. The days after 31 Dec are not used in this calculation. When the note is paid you will have to calculate the amount of interest expense for the other 47 days, then add this amount to the interest payable to get the total amount of interest paid.

For your current liabilities section you are correct except that your Interest Payable amount is off. It will be the same amount that has been calculated above.