20 D8 E10-5 exercise FAB Company sells a wide range of merchandise, which are initially purchased on account. Short-term notes are frequently issued to obtain cash. a) On January 10, FAB purchased $200 of merchandise on credit on a perpetual system. b) On March 1, FAB borrowed $600 by issuing a promissory note at face with 8 percent interest accrued at the beginning of each month until paid at maturity in six months. c) On April 1, FAB accrued interest on the $600 note. d) On September 1, FAB paid the note and accrued interest. REQUIRED: 1. On the spreadsheet below, record each event (a) to (d) above; name blank accounts. NAME 2. As each event is recorded, indicate its effect on FAB's current ratio, debt-asset ratio, and times interest earned: Increase, Decrease, or No effect. FAB had $3000 liabilities and $5000 total assets prior to January 10. Event--FAB Co. Beginning Balanc a)buy merchandise b) receive on note c) accrue interest for March on Apr 1 d) pay note pay interest Ending BALANCE a) buy mdse on credit SCF Cash Inven- Class tory 2500 2500 ➖➖➖➖➖➖ Curnt Debt Times Ratio Asst Interst ratio Earnd 1000 1000 1000 Comn Ret'd RE Stock Earn' Clas 1000 1000 ➖➖➖➖➖
20 D8 E10-5 exercise FAB Company sells a wide range of merchandise, which are initially purchased on account. Short-term notes are frequently issued to obtain cash. a) On January 10, FAB purchased $200 of merchandise on credit on a perpetual system. b) On March 1, FAB borrowed $600 by issuing a promissory note at face with 8 percent interest accrued at the beginning of each month until paid at maturity in six months. c) On April 1, FAB accrued interest on the $600 note. d) On September 1, FAB paid the note and accrued interest. REQUIRED: 1. On the spreadsheet below, record each event (a) to (d) above; name blank accounts. NAME 2. As each event is recorded, indicate its effect on FAB's current ratio, debt-asset ratio, and times interest earned: Increase, Decrease, or No effect. FAB had $3000 liabilities and $5000 total assets prior to January 10. Event--FAB Co. Beginning Balanc a)buy merchandise b) receive on note c) accrue interest for March on Apr 1 d) pay note pay interest Ending BALANCE a) buy mdse on credit SCF Cash Inven- Class tory 2500 2500 ➖➖➖➖➖➖ Curnt Debt Times Ratio Asst Interst ratio Earnd 1000 1000 1000 Comn Ret'd RE Stock Earn' Clas 1000 1000 ➖➖➖➖➖
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![20 D8 E10-5 exercise
FAB Company sells a wide range of merchandise, which are initially purchased on account.
Short-term notes are frequently issued to obtain cash.
a) On January 10, FAB purchased $200 of merchandise on credit on a perpetual system.
b) On March 1, FAB borrowed $600 by issuing a promissory note at face with 8 percent
interest accrued at the beginning of each month until paid at maturity in six months.
c) On April 1, FAB accrued interest on the $600 note.
NAME
d) On September 1, FAB paid the note and accrued interest.
REQUIRED:
1. On the spreadsheet below, record each event (a) to (d) above; name blank accounts.
2. As each event is recorded, indicate its effect on FAB's current ratio, debt-asset ratio,
and times interest earned: Increase, Decrease, or No effect. FAB had $3000 liabilities
and $5000 total assets prior to January 10.
Event--FAB Co.
Beginning Balanc
a)buy merchandise
b) receive on note
c) accrue interest
for March on Apr 1
d) pay note
pay interest
Ending BALANCE
a) buy mdse on
credit
SCF Cash Inven-
Class
tory
2500 2500
Curnt Debt Times
Ratio
Asst Interst
ratio Earnd
1000 1000
1000
Comn Ret'd RE
Stock Earn' Clas
1000 1000](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F92f9c27e-8a65-473f-9e90-e5d207bdfdd1%2Fdb440349-2083-41b6-b8aa-510790be9e0f%2Fstojj7_processed.png&w=3840&q=75)
Transcribed Image Text:20 D8 E10-5 exercise
FAB Company sells a wide range of merchandise, which are initially purchased on account.
Short-term notes are frequently issued to obtain cash.
a) On January 10, FAB purchased $200 of merchandise on credit on a perpetual system.
b) On March 1, FAB borrowed $600 by issuing a promissory note at face with 8 percent
interest accrued at the beginning of each month until paid at maturity in six months.
c) On April 1, FAB accrued interest on the $600 note.
NAME
d) On September 1, FAB paid the note and accrued interest.
REQUIRED:
1. On the spreadsheet below, record each event (a) to (d) above; name blank accounts.
2. As each event is recorded, indicate its effect on FAB's current ratio, debt-asset ratio,
and times interest earned: Increase, Decrease, or No effect. FAB had $3000 liabilities
and $5000 total assets prior to January 10.
Event--FAB Co.
Beginning Balanc
a)buy merchandise
b) receive on note
c) accrue interest
for March on Apr 1
d) pay note
pay interest
Ending BALANCE
a) buy mdse on
credit
SCF Cash Inven-
Class
tory
2500 2500
Curnt Debt Times
Ratio
Asst Interst
ratio Earnd
1000 1000
1000
Comn Ret'd RE
Stock Earn' Clas
1000 1000
![b) receive on note
c) accrue March
interest
d) pay note
pay interest](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F92f9c27e-8a65-473f-9e90-e5d207bdfdd1%2Fdb440349-2083-41b6-b8aa-510790be9e0f%2F86jp5gp_processed.png&w=3840&q=75)
Transcribed Image Text:b) receive on note
c) accrue March
interest
d) pay note
pay interest
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