Answer:
1. Finance charge = $2,720
2. Amount of cash paid = $66,720
3. Debt to Assets Ratio on January 10 is 0.62; and the impact is an increase from 0.60. Aiso, Debt to Assets Ratio on March 1 is 0.67; and the impact is an increase from 0.62.
Explanation:
1. For each of the transactions, indicate the accounts, amounts, and effects on the accounting equation.
Note: See part 1 of the attached excel file for the requirements of this question.
In the attached excel file, the amount of -$2,720 that appears under the Stockholder's Equity is the finance charge calculated as follows:
Finance charge = Amount borrowed * Interest rate * (Number of months to the promissory note due date / Number of months in a year) = $64,000 * 8.50% * (6 / 12) = $2,720
2. What amount of cash is paid on the maturity date of the note?
Note: See part 2 of the attached excel file for the calculation of the amount of cash is paid on the maturity date of the note.
From the attached excel file, we have:
Amount of cash paid = $66,720
3. Indicate the impact of each transaction (increase, decrease, and NE for no effect) on the debt-to-assets ratio, Assume Bryant Company had $300,000 in total liabilities and 500,000 in total assets, yielding a debt-to-assets ratio of 0.60, prior to each transaction.
Note: See part 3 of the attached excel file for the debt-to-assets ratios and the indication of impacts.
From the attached excel file, we have:
Debt to Assets Ratio on January 10 is 0.62; and the impact is an increase from 0.60.
Debt to Assets Ratio on March 1 is 0.67; and the impact is an increase from 0.62.
