PA10-1 Determining Financial Effects of Transactions Affecting Current Liabilities with Evaluation of Effects on the Debt-to-Assets Ratio [LO 10-2, LO 10-5]

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

Apr.		30		Received $672,000 from Commerce Bank after signing a 12-month, 9.00 percent, promissory note.
June		6		Purchased merchandise on account at a cost of $81,000. (Assume a perpetual inventory system.)
July		15		Paid for the June 6 purchase.
Aug.		31		Signed a contract to provide security service to a small apartment complex starting in September, and collected six months fees in advance, amounting to $27,000.
Dec.		31		Determined salary and wages of $46,000 were earned but not yet paid as of December 31 (ignore payroll taxes).
Dec.		31		Adjusted the accounts at year-end, relating to interest.
Dec.		31		Adjusted the accounts at year-end, relating to security service.

Required:

1. For each listed transaction and related adjusting entry, indicate the accounts, amounts, and effects on the accounting equation.
2. For each item, indicate whether the debt-to-assets ratio is increased or decreased or there is no change. (Assume Jack Hammers debt-to-assets ratio is less than 1.0.)