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 $25,eee. (Assume a perpetual inventory system. ) Jan. 17 Paid for the January 8 purchase. Apr. l Received $57,6ee from National Bank after signing a 12-month, 17.9 percent, promissory note. June 3 Purchased merchandise on account at a cost of $29,888 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 $12,688. (Use an account called Deferred Revenue.) Dec. 20 Collected $32e cash on account from a customer. Dec. 31 Determined that wages of $18,9ee 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.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 For each listed transaction and related adjusting entry, indicate the accounts, amounts, and effects on the accounting equation. (Do not round intermediate calculations. Enter any decreases to assets, liabilities, or stockholders equity with a minus sign. Enter your answers in transaction order provided in the problem statement.) Date Assets - Liabilities - Stockholders' Equity Jan. 8 Jan. 17 Apr. 1 June 3 July 5 July 31 Dec. 20 Dec 31 Dec. 31 Dec 31 Required 1 Required 2 >

Answer 1

1.

Answer 1
Date	Assets		=	Liabilities		+	Shareholders Equity
8-Jan	Inventory	$25,000	=	Accounts Payable	$25,000	+	0
17-Jan	Cash	($25,000)	=	Accounts Payable	($25,000)	+	0
1-Apr	Cash	$57,600	=	Note Payable	$57,600	+	0
3-Jun	Inventory	$29,000	=	Accounts Payable	$29,000	+	0
5-Jul	Cash	($29,000)	=	Accounts Payable	($29,000)	+	0
31-Jul	Cash	$12,600	=	Deferred Revenue	12600	+	0
20-Dec	Cash	320	=
	Account Receivable	($320)
31-Dec			=	Salary & Wages Payable	$10,900	+	Salaries & Wages	($10,900)
31-Dec			=	Interest Payable	$6,528	+	Interest Expense	($6,528)
31-Dec			=	Deferred Revenue	($10,500)	+	Service Revenue	$10,500
Interest expense for 8 months = [($57600 * 17%) / 12 months] * 8 Months = $6528
Service Revenue = (Unearned service revenue / 6 months) * 5 months = (12600/6)*5 = $10500

2.

Debt to Asset Ratio = Total Liabilities / Total Assets
Effect on Debt to Asset ratio		Numerator	Denominator
Date	Effect
8-Jan	Increase	Increase	Increase
17-Jan	Decrease	Decrease	Decrease
1-Apr	Increase	Increase	Increase
3-Jun	Increase	Increase	Increase
5-Jul	Decrease	Decrease	Decrease
31-Jul	Increase	Increase	Increase
20-Dec	No Effect	No Effect	No Effect
31-Dec	Increase	Increase	No Effect
31-Dec	Increase	Increase	No Effect
31-Dec	Decrease	Decrease	No Effect