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Group 3 Heather Daniel Jason North Lewis

Determining Financial Effects of Transactions Affecting Current Liabilities with Discussion of Cash Flow Effects. P9-3 Page 502. Group 3 Heather Daniel Jason North Lewis. Using the transactions from P9-2, complete the following requirements.

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Group 3 Heather Daniel Jason North Lewis

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  1. Determining Financial Effects of Transactions Affecting Current Liabilities with Discussion of Cash Flow Effects P9-3 Page 502 Group 3 Heather Daniel Jason North Lewis

  2. Using the transactions from P9-2, complete the following requirements. 1. For each transaction (including adjusting entries) listed in P9-2, indicate the effects (e.g., cash + or -), using the following schedule: DateAssets = Liabilities + Stockholder’s Equity 2. For each transaction, state whether cash flow from operating activities is increased, decreased, or remains the same. 3. For each transaction, state whether the current ratio is increased, decreased, or remains the same.

  3. Transactions from P9-2

  4. January 8 Purchased merchandise for resale on account at an invoice cost of $25,000; assume periodic inventory system. • Req.1 Merchandise (+A) $25,000 Accounts Payable (+L) $25,000 • Req.2 Cash Flow: Same • Req.3 Current Ratio: Decrease

  5. January 17 Paid January 8 invoice. • Req.1 Accounts Payable (–L) $25,000 Cash (–A) $25,000 • Req.2 Cash Flow: Decrease • Req.3 Current Ratio: Increase

  6. April 1 Borrowed $40,000 from National Bank for general use; executed a 12-month, 12 percent interest-bearing not payable. • Req.1 Cash (+A) $40,000 Note Payable (+L) $40,000 • Req.2 Cash Flow: Same—this is a financing activity—no effect on operating activity • Req.3 Current Ratio: Decrease

  7. June 3 Purchased merchandise for resale on account at an invoice cost of $18,000. • Req.1 Merchandise (+A) $18,000 Accounts Payable $(+L) $18,000 • Req.2 Cash Flow: Same • Req.3 Current Ratio: Decrease

  8. July 5 Paid June 3 invoice. • Req.1 Accounts Payable (–L) $18,000 Cash $(–A) $18,000 • Req.2 Cash Flow: Decrease • Req.3 Current Ratio: Increase

  9. August 1 Rented a small office in a building owned by the company and collected six months’ rent in advance amounting to $5,100. • Req.1 Cash (+A) $5,100 Rent Revenue (+R, +SE) $5,100 • Req.2 Cash Flow: Increase • Req.3 Current Ratio: Increase

  10. December 20 Received a $500 deposit from a customer as a guarantee to return a large trailer “borrowed” for 30 days. • Req.1 Cash (+A) $500 Customer Deposit (+L) $500 • Req.2 Cash Flow: Increase • Req.3 Current Ratio: Decrease

  11. December 31 Determined wages of $10,000 earned but not yet paid on December 31 • Req.1 Wages Expense (+E, -SE) $10,000 Wages Payable (+L) $10,000 • Req.2 Cash Flow: Same • Req.3 Current Ratio: Decrease

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