Smith Company completed the following transactions during 2009. The annual accounting period ends December 31, 2009.
Jan. 8 Purchased merchandise for resale on account at an invoice cost of $14,860; assume a periodic inventory system.
17 Paid January 8 invoice.
Apr. 1 Borrowed $35,000 from National Bank for general use; executed a 12-month,
12 percent interest-bearing note payable.
June 3 Purchased merchandise for resale on account at an invoice cost of $17,420.
July 5 Paid June 3 invoice.
Aug. 1 Rented a small office in a building owned by the company and collected six months’ rent in advance amounting to $6,000. (Record the collection in a way that will not require an adjusting entry at year-end.)
Dec. 20 Received a $100 deposit from a customer as a guarantee to return a large trailer “borrowed” for 30 days.
31 Determined wages of $9,500 earned but not yet paid on December 31 (disregard payroll taxes).

Required:
1. Prepare journal entries for each of these transactions.
2. Prepare all adjusting entries required on December 31, 2009.
3. Show how all of the liabilities arising from these transactions are reported on the balance sheet at December 31, 2009.
4. For each transaction, state whether the current ratio is increased, decreased, or remains the same.
5. For each transaction, state whether cash flow from operating activities is increased, decreased, or there is no effect.