Question: Determining the Impact of Current Liability Transactions Including Analysis of the Current Ratio Bryant Company sells a wide range of inventories that are initially purchased on accounts payable. Occasionally, a short-term note payable is used to obtain cash for current use. The following transactions were selected from those occurring during 2009:
(a) On January 10, 2009, purchased merchandise on credit for $18,000. The company uses a perpetual inventory system.
(b) On March 1, 2009, borrowed $40,000 cash from City Bank and gave a $40,000 interest bearing note payable due in six months plus interest stated an annual rate of 8 percent payable at maturity.
Required: 1. Show the journal entry and accounting equation effects on January 10 and March 1.
2. Describe the impact of each transaction on the current ratio. (Assume Bryant Company's current assets have always been more than its current liabilities.)
3. What amount of cash is paid on the maturity date of the note?