Question

EZ Curb Company completed the following transactions. The annual accounting period ends December 31. Jan. 8 Purchased merchandise on account at a cost of $23,000. (Assume a perpetual inventory system. ) Jan. 17 Paid for the January 8 purchase. Apr. 1 Received $54,400 from National Bank after signing a 12-month, 15.0 percent, promissory note. June 3 Purchased merchandise on account at a cost of $27,000. July 5 Paid for the June 3 purchase. July 31 Rented out a small office in a building owned by EZ Curb Company and collected six months' rent in advance, amounting to $11,400. (Use an account called Deferred Revenue.) Dec. 20 Collected $280 cash on account from a cus Dec. 31 Determined that wages of $10,100 were earned but not yet paid on December 31 (Ignore payroll taxes). Dec. 31 Adjusted the accounts at year-end, relating to interest. Dec. 31 Adjusted the accounts at year-end, relating to rent. Required: 1. For each listed transaction and related adjusting entry, indicate the accounts, amounts, and effects on the accounting equation. 2. For each transaction and related adjusting entry, indicate whether the debt-to-assets ratio is increased or decreased or there is no change. (Assume EZ Curb Company's debt-to-assets ratio has always been less than 1.0.)

Answer 1

	Assets		=	Liabilities		+	Stockholders Equity
Jan-08	Inventory	$                  23,000		Accounts Payable	$            23,000
Jan-17	Cash	$                -23,000		Accounts Payable	$           -23,000
Apr-01	Cash	$                  54,400		Short Term Promisory Note	$            54,400
Jun-03	Inventory	$                  27,000		Accounts Payable	$            27,000
Jul-05	Cash	$                -27,000		Accounts Payable	$           -27,000
Jul-31	Cash	$                  11,400		Deferred Revenue	$            11,400
Dec-20	Cash	$                        280
	Accounts Receivable	$                      -280
Dec-31				Wages Payable	$            10,100		Retained Earnings	$         -10,100
Dec-31				Interest Payable	$               6,120		Retained Earnings	$           -6,120
Dec-31				Deferred Revenue	$             -9,500		Retained Earnings	$             9,500

Date	Effect on Ratio	Numerator		Denominator
Jan-08	Increase	Increase by $23000		Increase by $23000
Jan-17	Decrease	Decrease by $23000		Decrease by $23000
Apr-01	Increase	Increase by $54400		Increase by $54400
Jun-03	Increase	Increase by $27000		Increase by $27000
Jul-05	Decrease	Decrease by $27000		Decrease by $27000
Jul-31	Increase	Increase by $11400		Increase by $11400
Dec-20	No effect	No effect		No effect
Dec-31	Increase	Increase by $10100		No effect
Dec-31	Increase	Increase by $6120		No effect
Dec-31	Decrease	Decrease by $9500		No effect

Debt to assets ratio = Total liabilities / Total Assets