Question

Issued 5,000 shares of $1 par common stock for $50,000 cash. Record the transaction 1 Collected $3,000 from customers on account. Record the transaction 3 Reacquired 3,000 shares of $1 par common stock into treasury for $33,000 cash. Record the transaction Reissued 2,000 shares of treasury stock for $24,000 cash. Record the transaction. Reissued 600 shares of treasury stock for $4,600 cash. 5 Record the transaction. Declared (but did not yet pay) a $1 cash dividend on each outstanding share of common stock. Record the transaction 6 7 Issued 100, 10-year, $1,000 bonds, at a quoted bond price of 101. Record the transaction. 8 Wrote off a $2,000 balance due from a customer who went bankrupt. Record the transaction. Recorded $230,000 of service revenue, all of which was collected in cash. Record the transaction 10 Paid $200,000 cash for this year's wages through December 31. Ignore payroll taxes and payroll deductions Record the transaction. 11 Calculated $10,000 of depreciation for the year to be recorded. (Ignore accrual adjustments for interest and income taxes.) Record the transaction. 12 Prepare a closing journal entry for the income statement accounts, assuming the events on December 29-31 were the only transactions to affect income statement accounts. Record the transaction 13 Prepare the closing entry for Dividends. Record the transaction

Answer 1

Prepare balance sheet as follows:

American Laser Inc
Classified Balance Sheet
At December 31
Assets:
Current assets
Cash		389600
Non-current assets:
Building	247000
Less: Accumulated depreciation	-40000	207000
Total assets		596600
Liabilities:
Current liabilities:
Dividends payable	14600
Salaries payable	200000
Total current liabilities		214600
Non current liabilities:
bonds payable	100000
Notes payable	10000
Total non current liabilities		110000
Shareholder's equity:
Common stock	15000
Additional paid in capital	135000
Premium on bonds	1000
Treasury stock	-4400
Retained earnings	125400
Total shareholder's equity		272000
Total liabilities and shareholder's equity		596600

2.

At Jan 1:

Debt to asset ratio = Total debts / total assets

Debt to asset ratio = 10000 / 230000

Debt to asset ratio = 4.35 %

At Dec 31:

Debt to asset ratio = Total debts / total assets

Debt to asset ratio = 214600 + 110000 / 596600

Debt to asset ratio = 324600 / 596600

Debt to asset ratio = 54.41%

The company rely more on debt financing at the end of the year. The debt financing increased to 54.41% at the end of the year.