
1.
To show:
1.

Explanation of Solution
Liabilities: Liabilities are debt and obligations of a business. These are the claims against the resources that a business owes to outsiders of the company. Liabilities may be Current liabilities, and Long-term liabilities. Examples:Creditors, Bills payable, Bank overdraft, Salaries and wages payable, and Notes payable.
The following is the accounting equation for the given transactions:
Working note:
Calculate interest expense at December 31 as below:
Calculate the amount of unearned revenue earned at December 31 as below:
2.
To analyze: The impact of each transaction on debt to assets ratio.
2.

Explanation of Solution
Debt to assets ratio: Debt to assets ratio is used to evaluate the relationship between the total liabilities and total assets of the company. Debt to equity ratio helps the company to determine the proportion of debt and assets. When the ratio is greater than 1, then it is higher and thus, company faces higher risk.
Debt to assets ratio is calculated by using the following formula:
Show the impact of each transaction on debt to assets ratio.
Impact of each transaction on debt to assets ratio | |||
Transaction | Total liabilities | Total assets | Effect on Ratio |
April 30 | Increased | Increased | Increased |
June 6 | Increased | Increased | Increased |
July 15 | Decreased | Decreased | Decreased |
August 31 | Increased | Increased | Increased |
December 31 | Increased | No Change | Increased |
December 31 | Increased | No Change | Increased |
December 31 | Decreased | No Change | Decreased |
Table (1)
Want to see more full solutions like this?
Chapter 10 Solutions
Fundamentals of Financial Accounting
- Harper Manufacturing produces a special type of polymer used in medical devices. In 2022, the first year of operations, Harper produced 5,500 tons of polymer and sold 3,200 tons. In 2023, the company produced the same amount but sold 6,500 tons (i.e., selling all of its inventory). The selling price per ton was $1,800, variable manufacturing costs per ton were $350, and variable selling expenses were $500 per ton. Fixed manufacturing costs were $3,500,000, and fixed administrative expenses were $600,000. Compute net income under variable costing for 2022.arrow_forwardBurson Enterprises' May 31 bank reconciliation shows deposits in transit of $850. The general ledger Cash in Bank account shows total cash receipts during June of $48,500. The June bank statement shows total cash deposits of $44,300 (including $1,500 from the collection of a note; the note collection has not yet been recorded by Burson). What amount of deposits in transit should appear in the June 30 bank reconciliation? Helparrow_forwardCompute total manufacturing costsarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
- Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:CengageEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENTPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College


