052 polnts E105 Determining the Impact of Current Liability

0.52 polnts E10-5 Determining the Impact of Current Liability Transactions, Including Analysis of the Debt-to-Assets Ratio [LO 10-2, LO 10-5] Bryant Company sells a wide range of inventories, which are initially purchased on account. Occasionally, a short-term note payable is used to obtain cash for current use. The following transactions were selected from those occurring during the year. a. On January 10, purchased merchandise on credit for $26,000. The company uses a perpetual inventory system. b. On March 1, borrowed $56,000 cash from City Bank and signed a promissory note with a face amount of $56,000, due at the end of six months, accruing interest at an annual rate of 7.00 percent, payable at Required: 1. For each of the transactions, indicate the accounts, amounts, and effects on the accounting equation Enter any decreases to account balances with a minus sign.) Date Assets Liabilities Stockholders\' Equity January 10 March 1

Solution

1.

2.cash paid on maturity date of note?

$56,000 + ($56,000 * 7% * 6months / 12 months)

=>$57,960.

3.

working:

debt to equity ratio after 1st transaction = (460,000 + 26,000) / (660,000 + 26,000)

=> (486,000 / 686,000)

=>0.71....(to 2 decimals).

debt to equity after 2nd transaction = (460,000 + 56,000) / (660,000+56,000)

=>516,000 / 716,000

=>0.72....(to 2 decimals)

Date	Assets	=	Liabilities		+ stockholder\'s equity
january 10	Merchandise inventory	$26,000	Accounts payable	$26,000		$0
March 1	Cash	$56,000	Notes payable	$56,000		$0