Course: NUT4553-101 MxCh10HW xC Need Help With This Ple: X Cezto.mheducation.com
ID: 2400448 • Letter: C
Question
Course: NUT4553-101 MxCh10HW xC Need Help With This Ple: X Cezto.mheducation.com/hm.tpx Tiger Company completed the following transactions. The annual accounting period ends December 31 Jan. 3 Purchased merchandise on account at a cost of $26,000. (Assume a perpetual inventory system.) Jan. 27 Paid for the January 3 purchase Apr 1 Received $82,000 from Atlantic Bank after signing a 12-month, 6.0 percent promissory note June 13 Purchased merchandise on account at a cost of $8,400 July 25 Paid for the June 13 purchase Aug. Rented out a small office in a building owned by Tiger Company and collected eight months' rent in advance amounting to $8,400. (Use an account called Unearned Rent Revenue.) Determined wages of $14,000 were earned but not yet paid on December 31 (ignore payroll taxes). Dec. 31 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. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign. Enter your answers in transaction order provided in the problem Date Jan. 3 Jan. 27 Apr. 1 June 13 July 25 Aug. 1 Dec. 31 Dec. 31 Dec. 31 Assets iabilities Stockholders' Equity O Type here to search 7/9/2018Explanation / Answer
Accounting Equation
Date
Assets
Liabilities+
Shareholder's Equity
3-Jan
Inventory
$ 26,000.00
Accounts Payable
$ 26,000.00
27-Jan
Cash
$ (26,000.00)
Accounts Payable
$ (26,000.00)
1-Apr
Cash
$ 82,000.00
Notes Payable
$ 82,000.00
13-Jun
Inventory
$ 8,400.00
Accounts Payable
$ 8,400.00
25-Jul
Cash
$ (8,400.00)
Accounts Payable
$ (8,400.00)
1-Aug
Cash
$ 8,400.00
Unearned Rent Revenue
$ 8,400.00
31-Dec
Wages Payable
$ 17,000.00
Wages Expenses
$ (17,000.00)
31-Dec
Interest Payable
$ 3,960.00
Interest expense
$ (3,960.00)
31-Dec
Unearned Rent Revenue
$ (5,250.00)
Rent Revenue
$ 5,250.00
Total
$ 90,400.00
$ 106,110.00
$ (15,710.00)
Effect on Debt to Asset ratio
Effect on ratio
Numerator
Denominator
3-Jan
No effect
$ 26,000.00
$ 26,000.00
27-Jan
No effect
$ (26,000.00)
$ (26,000.00)
1-Apr
No effect
$ 82,000.00
$ 82,000.00
13-Jun
No effect
$ 8,400.00
$ 8,400.00
25-Jul
No effect
$ (8,400.00)
$ (8,400.00)
1-Aug
No effect
$ 8,400.00
$ 8,400.00
31-Dec
Increase
$ 17,000.00
$ -
31-Dec
Increase
$ 3,960.00
$ -
31-Dec
Decrease
$ 5,250.00
$ -
Notes.
At the time of increase in current liabilities , debt of company increase but no asset is increased. The ratio of Debt to equity is increased as well.
Similarly when Liabilities decrease. Debt ratio decreased.
From 3 jan to 1 aug. the ratio of Increase in asset is same as increase in liability that is why the overall effect on Debt equity ratio is nil.
Accounting Equation
Date
Assets
Liabilities+
Shareholder's Equity
3-Jan
Inventory
$ 26,000.00
Accounts Payable
$ 26,000.00
27-Jan
Cash
$ (26,000.00)
Accounts Payable
$ (26,000.00)
1-Apr
Cash
$ 82,000.00
Notes Payable
$ 82,000.00
13-Jun
Inventory
$ 8,400.00
Accounts Payable
$ 8,400.00
25-Jul
Cash
$ (8,400.00)
Accounts Payable
$ (8,400.00)
1-Aug
Cash
$ 8,400.00
Unearned Rent Revenue
$ 8,400.00
31-Dec
Wages Payable
$ 17,000.00
Wages Expenses
$ (17,000.00)
31-Dec
Interest Payable
$ 3,960.00
Interest expense
$ (3,960.00)
31-Dec
Unearned Rent Revenue
$ (5,250.00)
Rent Revenue
$ 5,250.00
Total
$ 90,400.00
$ 106,110.00
$ (15,710.00)