Question

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 annual accounting period ends December 31.
Jan. 8 Purchased merchandise on account at a cost of $ 14,000. (Assume a perpetual inventory system.)
17 Paid for the January 8 purchase.
Apr. 1 Received $ 40,000 from National Bank after signing a 12-month, 6 percent, promissory note.
June 3 Purchased merchandise on account at a cost of $ 18,000. July 5 Paid for the June 3 purchase.
Aug. 1 Rented out a small office in a building owned by EZ Curb Company and col-lected six months’ rent in advance, amounting to $ 6,000. (Use an account called Unearned Revenue.)
Dec. 20 Collected $ 100 cash on account from a customer.
Dec. 31 Determined that wages of $ 6,500 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 (+ for increase, – for decrease, and NE for no effect) on the accounting equation, using the following format:
2. For each transaction and related adjusting entry, state 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.)


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  • CreatedNovember 02, 2015
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