Part I - Baxter Company is a retail store which uses a perpetual inventory system and sells a lot of gift certificates. Their current ratio is $400,000 / $200,000 = 2.00 before the following chronological events. A. Baxter collected $75,000 for gift certificates for merchandise from their store. Prepare the entry to record this transaction and calculate the new current ratio. Ignore any tax impact. B. $53,000 of the gift certificates in part l were redeemed for $30,000 of products. Prepare the entry to record this transaction and calculate the new current ratio including the impact of transactions 1 and 2. Ignore any tax impact. c. Products which were sold for $1,000 on account were returned by the customer before the customer paid for the merchandise. Baxter credited the customer's account. These products originally cost $400. D. What is the total impact on net income of the three transactions above? Ignore any tax impact Part II - Your company normally sells products on account to customers, but one of your customers wants to purchase products for $200,000 on September 1 and pay for it six months later on February 28. These products cost $72,000. You agreed to do this transaction because you value this customer, but you asked the customer to sign a 6 month, 8% note. a. Show how this will affect the income statement for the year ended December 31. Please list out all of the accounts and amounts which will appear on the income statement because of this transaction and indicate whether each amount increases net income or decreases it b. Show how this will affect the balance sheet as of the end of the year on December 31. Please list out all of the accounts and amounts which will appear on the balance sheet because of this transaction and indicate whether the balances are increasing or decreasing Part I - Baxter Company is a retail store which uses a perpetual inventory system and sells a lot of gift certificates. Their current ratio is $400,000 / $200,000 = 2.00 before the following chronological events. A. Baxter collected $75,000 for gift certificates for merchandise from their store. Prepare the entry to record this transaction and calculate the new current ratio. Ignore any tax impact. B. $53,000 of the gift certificates in part l were redeemed for $30,000 of products. Prepare the entry to record this transaction and calculate the new current ratio including the impact of transactions 1 and 2. Ignore any tax impact. c. Products which were sold for $1,000 on account were returned by the customer before the customer paid for the merchandise. Baxter credited the customer's account. These products originally cost $400. D. What is the total impact on net income of the three transactions above? Ignore any tax impact Part II - Your company normally sells products on account to customers, but one of your customers wants to purchase products for $200,000 on September 1 and pay for it six months later on February 28. These products cost $72,000. You agreed to do this transaction because you value this customer, but you asked the customer to sign a 6 month, 8% note. a. Show how this will affect the income statement for the year ended December 31. Please list out all of the accounts and amounts which will appear on the income statement because of this transaction and indicate whether each amount increases net income or decreases it b. Show how this will affect the balance sheet as of the end of the year on December 31. Please list out all of the accounts and amounts which will appear on the balance sheet because of this transaction and indicate whether the balances are increasing or decreasing
