Bryant Company sells a wide range of inventories, which are initially 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 2013:
a. On January 10, 2013, purchased merchandise on credit for $18,000. The company uses a perpetual inventory system.
b. On March 1, 2013, borrowed $40,000 cash from City Bank and signed a promissory note with a face amount of $40,000, due at the end of six months, accruing interest at an annual rate of 8 percent, payable at maturity.
1. For each of the transactions, indicate the accounts, amounts, and effects (+ for increase,
- for decrease, and NE for no effect) on the accounting equation. Use the following structure:
Date Assets = Liabilities + Stockholders' Equity
2. What amount of cash is paid on the maturity date of the note?
3. Discuss the impact of each transaction on the quick ratio. (Assume Bryant Company's quick ratio was 1.10 prior to each transaction.)