Question

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CP10-1 Determining Financial Effects of Transactions Affecting Current Liabilities with Evaluation of Effects on the Debt-to-Assets Ratio Ez Curb Company completed the following transactions. The anual accounting period ends December 31 [LO 10-2, LO 10-5 Jan. 8 Purchased merchandise on acoount at a cost of $26,500 Assume a perpetual inventory systemm.) 17 Paid for the January 8 purchase. Apr. 1 Received $80.000 from National Bank afer signing a 12-month, 18.5 percent, promissory nota June 3 Purchased merchandise on account at a cost of $30,500 July 5 Paid for the June 3 purchase Aug. 1 Rented out a small office in a building owned by EZ Curb Company and collected six months rent in advance, amounting to $13,500 (Use an account called Unearned Revenue.) Dec. 20 Collected $350 cash on account fhom a customer Dec. 31 Determined that wages of $11,500 were earmed bu not yet pais on December 31 (Ignore payrcol taxes) Dec. 31 Adjusted the accounts at yeariend, relating to interest 0ec 31 Adjushed the accounts at year-end, relating to rent Required: 1. For each lsted transaction and related adjusting entry, indicate the accounts, amounts, and eflects on the accounting equation. (Do not round intermediate calculationrs. Enter any decreases to account balances with a minus sign. Enter your answers in transaction order provided in the problem statement.) Jan. 17 Apr. 1 June 3 July 5 Aug. 1 Dec. 20 Dec. 31 Dec. 31 Doo. 31

Answer 1

Required 1.for each listed transation and releted adjusting entry indicate the account, amount, and effect.

Date	Asset	Amount	Liabilities	Amount	Equity	Amount
Jan 8	Inventory_Debit	$26,500	Accounts Payable_Credit	$26,500
Jan 17	Cash_Credit	-$26,500	Accounts Payable_Debit	-$26,500
Apr 1	Cash_Debit	$ 60,000	Loan from national bank Account_Credit	$60,000
June 3	Inventory_Debit	$30,500	Accounts payable_Credit	$30,500
July 5	Cash_Credit	-$30500	Accounts payable_Debit	$30,500
Aug 1	Cash_Debit	$13,500	Unearned revenue_Credit	$13,500
Dec 20	Cash_Debit	$350	Cusomer advance_Credit	$350
Dec 31			Unpaid Wages_Credit (Debited to Wages account)	$11,500
Dec 31			Interest payable_credit (60000*18.5%) / 12*9) (Debited to interest expenses account)	$8,325
Dec 31			Unearned income_debit ($13,500/6*5)	$11,250

Explanantion to aboave enrty.

1.Jan 8.

Purchased merchandise on account, in this entry inventory(asset) is incresed on the other hand account payable (Liability) also incresed.

2.Jan 17

Pay for purchase made as on jan 8.

Cash(asset) decresed and accounts payable(liability) on the other side also decrecred.

3.April 1,

receved loan from nationalised bank.

Cash(asset) incresed and Loan (liability) on the other side also incresed.

4&5.(June 3 and july 5-same enrty passed in the month of january)

6. Aug 1,

Rent received in advance

Cash (Asset) incresed on the other hand unearned income is liability for recipient.

7.Dec 20,

Cash received from customer in advance

8.There is unpaid wages of $11,500

Entry will be....

Wages account............Debit $11500

To unpaid wages account..... $11500

9.Interest expenses which is payable at the year end for 9 month.

Entry will be....

interest account............Debit $8,325

To unpaid wages account..... $8,325

10.Rent received in advance adustment entry

Entry will be....

Unearned income............Debit $11,250

To rent ..... $11,250

-----------------------------End of solution of requirement one----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

2.Effect on debt to asset ratio.

Date	Effect on Rato	Numerator	Denomonator
Jan 8	No effect
Jan 17	No effect
Apr 1	No effect
June 3	No effect
Jul 5	No effect
Aug 1	No effect
Dec 20	No effect
Dec 31	Incresed	$85,350	$73,850
Dec 31	Incresed	$93,675	$73,850
Dec 31	Incresed	$104,925	$73850