Question

Tiger Company completed the following transactions.
The annual accounting period ends December 31.
Jan. 3 Purchased merchandise on account at a cost of $31,000. (Assume a perpetual inventory system.)
Jan. 27 Paid for the January 3 purchase
Apr. 1 Received $87,000 from Atlantic Bank after signing a 12-month, 6.0% promissory note
June 13 Purchased merchandise on account at a cost of $9.400
July 25 Paid for the June 13 purchase
Aug. 1 Rented out a small office in a building owned by Tiger Company and collected eight months' rent
Dec. 31 Determined wages of $19,000 were earned but not yet paid on December 31 (ignore payroll in advance amounting to $9,400. (Use an account called Unearned Rent Revenue.)
Dec. 31 Adjusted the accounts at year-end, relating to interest
Dec. 31 Adjusted the accounts at year-end, relating to rent
Required:
1. For each listed transaction and related adusting entry, indicate the accounts, amounts, and effects on the accounting equation.
(Do not round intermediate calculations)
Enter your answers in transaction order provided in the problem statement.
Date Assets = Liabilities + Stockholders' Equity
2. For each item, indicate whether the debt-to-assets ratio is increased or decreased or there is no change.
(Assume Tiger Company's debt-to-assets ratio is less than 1.0)
Enter your answers in transaction order provided in the problem statement
Date Effect Numerator Denominator

Answer 1

Answer:

Tiger Company

1. Accounts, Amounts, and Effects on the Accounting Equation:

Date        Assets = Liabilities + Stockholders' Equity

Jan. 3      Inventory $31,000 increased = Accounts Payable $31,000 increased + Stockholders' Equity

Jan. 27    Cash $31,000 decreased = Accounts Payable $31,000 decreased + Stockholders' Equity.

Apr. 1      Cash $87,000 increased = Notes Payable $87,000 increased + Stockholders' Equity

June 13   Inventory $9,400 increased = Accounts Payable $9,400 increased + Stockholders' Equity

July 25   Cash $9,400 decreased = Accounts Payable $9,400 decreased + Stockholders' Equity.

Aug. 1     Cash $9,400 increased = Liability + Rent Revenue (Retained Earnings) $9,400 increased.

Dec. 31   Assets = Wages Payable $19,000 increased + Wages Expense (Retained Earnings) $19,000 decreased

Dec. 31   Assets = Interest Payable $1,305 increased + Interest Expense (Retained Earnings) $3,915 decreased

Dec. 31  Assets = Unearned Rent Revenue $3,525 increased + Rent Revenue (Retained Earnings) $3,525 decreased.

2. Indication of whether the debt-to-assets ratio is increased or decreased:

Date Effect Numerator Denominator

Jan. 3 Increased, Debt is increased, Assets are increased

Jan. 27 Decreased, Debt is decreased, and Assets are decreased

Apr. 1  Increased, Debt is increased, Assets are increased

June 13 Increased, Debt is increased, Assets are increased

July 25 Decreased, Debt is decreased, and Assets are decreased

Aug. 1 Increased, Debt is increased, Assets are increased

Dec. 31 Increased, Debt is increased, Assets are not affected.

Dec. 31 Increased, Debt is increased, Assets are not affected.

Dec. 31 Increased, Debt is increased, Assets are not affected.

Explanation:

The accounting equation indicates the balance that exists between the basic elements of accounting.  It states that Assets = Liabilities + Stockholders' Equity.  For every transaction, this equation holds true, because by the double entry system of bookkeeping, two or more accounts are always involved in every business transaction.