Question

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

Apr.		30		Received $572,400 from Commerce Bank after signing a twelve-month, 8 percent, promissory note
June		6		Purchased merchandise on account at a cost of $84,000 (Assume a perpetual inventory system.)
July		15		Paid for the June 6 purchase
Aug.		31		Signed a contract to provide security services to a small apartment complex and collected six months’ fees in advance, amounting to $29,400 (Use an account called Deferred Revenue.)
Dec.		31		Determined salary and wages of $49,000 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 services

    
Required:
1. For each listed transaction and related adjusting entry, indicate the effects (accounts, and amounts on the accounting equation, using the following format: (Enter any decreases to accounts with a minus sign.)

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.)

Answer 1

Since format was not given, i have used general format.

1.

Date	Cash	Inventory	Accounts Payable	Salaries Payable	Interest Payable	Deferred Revenue	Notes Payable	Retained Earnings
Apr-30	$       572,400						$      572,400
Jun-06		$           84,000	$           84,000
Jun-15	$       (84,000)		$         (84,000)
Aug-31	$         29,400					$        29,400
Dec-31				$       49,000				$      (49,000)	Salaries Expense
Dec-31					$    30,528			$      (30,528)	Interest Expense
Dec-31						$      (19,600)		$        19,600	Service Revenue

2.

Date	Effect
Apr-30	Increase
Jun-06	Increase
Jun-15	Decrease
Aug-31	Increase
Dec-31	Increase
Dec-31	Increase
Dec-31	Decrease