Debt to assets ratio is increased or decreased

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Reference no: EM13868115

Jack Hammer Company completed the following transactions. The annual accounting period ends December 31.

Apr. 30 Received $ 600,000 from Commerce Bank after signing a 12-month, 6 percent, promissory note.

June 6 Purchased merchandise on account at a cost of $ 75,000. (Assume a perpetual inventory system.)

July 15 Paid for the June 6 purchase.

Aug. 31 Signed a contract to provide security service to a small apartment complex and collected six month's fees in advance amounting to $ 24,000. (Use an account called Unearned Revenue.)

Dec. 31 Determined salary and wages of $ 40,000 were earned but not yet paid as of 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 security service.

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 item, state whether the debt-to-assets ratio is increased or decreased or there is no change. (Assume Jack Hammer's debt-to-assets ratio is less than 1.0.)

Reference no: EM13868115

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