Bryant Company sells a wide range of inventories, which are nitially purchased o

Question

Bryant Company sells a wide range of inventories, which are nitially 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 On January 10, purchased merchandise on credit for $28,000. The company uses a perpetual inventory system. bOn March 1, borrowed $60,000 cash from City Bank and signed a promissory note with a face amount of $60,000, due at the end of six months, accruing interest at an annual rate of 9.00 percent, payable at maturity. Required: 1 For each of the transactions, indicate the accounts, amounts, and effects on the accounting equation. (Enter any decreases to account balances with a minus sign.) Assets January 10 March 1

Explanation / Answer

2. Cash amount payable on maturity date

= Principal + Interest

= 60000 + (60000*9%*6/12)

= 60000 + 2700 = 62700

3. Impact

(a) Increase = 0.725 (500000+28000)/ (700000+280000)

(b) Increase = 0.746 (500000+28000+60000)/ (700000+28000+60000)

Date Assets Liabilities Shareholders Equity 10-Jan Inventory 28000 Creditors 28000 01-Mar Cash 60000 Borrowing from City Bank 60000

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