Bryant Company sells a wide range of inventories, which are initially purchased on account. Occasionally, a short-term note payable is used to obtain cash for current use. The following transactions were selected from those occurring during the year:
a. On January 10, purchased merchandise on credit for $ 18,000. The company uses a perpetual inventory system.
b. On March 1, borrowed $ 40,000 cash from City Bank and signed a promissory note with a face amount of $ 40,000, due at the end of six months, accruing interest at an annual rate of 8 percent, payable at maturity.
1. For each of the transactions, indicate the accounts, amounts, and effects (+ for increase, – for decrease, and NE for no effect) on the accounting equation. Use the following structure:
2. What amount of cash is paid on the maturity date of the note?
3. Indicate the impact of each transaction (+ for increase, – for decrease, and NE for no effect) on the debt-to-assets ratio. Assume Bryant Company had $ 300,000 in total liabilities and $ 500,000 in total assets, yielding a debt-to-assets ratio of 0.60, prior to each transaction.

  • CreatedNovember 02, 2015
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