Jack Hammer Company completed the following transactions. The annual accounting

Question

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

Received $792,000 from Commerce Bank after signing a 12-month, 5 percent, promissory note.

Purchased merchandise on account at a cost of $91,000. (Assume a perpetual inventory system.)

Signed a contract to provide security service to a small apartment complex and collected six months’ fees in advance amounting to $32,000. (Use an account called Unearned Revenue.)

Determined salary and wages of $56,000 were earned but not yet paid as of December 31 (ignore payroll taxes).

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

Jack Hammer Company completed the following transactions. The annual accounting period ends December 31 Received $792,000 from Commerce Bank after signing a 12-month, 5 percent, promissory note. Purchased merchandise on account at a cost of S91,000. (Assume a perpetual inventory system.) Paid for the June 6 purchase. Apr. 30 June 6 July 15 Aug. 31 Signed a contract to provide security service to a small apartment complex and collected six Dec. 31 Determined salary and wages of $56,000 were earned but not yet paid as of December 31 Dec. 31 Adjusted the accounts at year-end, relating to interest months' fees in advance amounting to $32,000. (Use an account called Unearned Revenue.) ignore payroll taxes). Adjusted the accounts at year-end, relating to security service Dec. 31 Required: 1. For each listed transaction and related adjusting entry, indicate the accounts, amounts, and effects on the accounting equation. (Do not round intermediate calculations. Enter any decreases to account balances with a minus sign. Enter your answers in transaction order provided in the problem statement.) Date Apr. 30 June 6 July 15 Aug. 31 Dec. 31 Dec. 31 Dec. 31 Assets Liabilities Stockholders' Equity 2. For each item, indicate 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.) (Enter your answers in transaction order provided in the problem statement.) Transaction Apr. 30 June 6 July 15 Aug. 31 Dec. 31 Dec. 31 Dec. 31 Effect Numerator Denominator

Explanation / Answer

Req 1: Date Assets             = Liabilities            + Stockholder's equity 30-Apr 792000 792000 6-Jun 91000 91000 15-Jul -91000 -91000 31-Aug 32000 32000 31-Dec 56000 -56000 31-Dec 26400 -26400 31-Dec -21333 21333 Note: Interest payable on Bank: 792000*5%*8/12= $ 26400 Note: Service revenue recognized = 32000/6*4 months = 21333 Req 2: Transaction Effect Numerator Denominator 30-Apr Increase Increase Increase 6-Jun Increase Increase Increase 15-Jul Decrease Decrease Decrease 31-Aug Increase Increase Increase 31-Dec Decrease No effect Increase 31-Dec Decrease No effect Increase 31-Dec Increase No effect Decrease

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