Question

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 $25,000. The company uses a perpetual inventory system. b. On March 1, borrowed $54,000 cash from City Bank and signed a promissory note with a face amount of $54,000, due at the end of six months, accruing interest at an annual rate of 6.00 percent, payable at maturity. 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.) Assets Stockholders' Equity Date Liabilities January 10 March 1

Answer 1

Solution

Date	Assets		=	Liabilities		+	Stockholder's equity
Jan-10	Merchandise Inventory	$ 25,000.00		Accounts payable	$ 25,000.00
Mar-01	Cash	$ 54,000.00		Notes payable	$ 54,000.00

Since Perpetual inventory is used merchandise inventory will be debited instead of purchase account. On issue of note cash will be received and liability for notes payable will be recorded.

Interest on note will not be recorded as nothing has been accrued yet.