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Dan's Dependable Delivery is a national delivery service. You are an accountant for Dan's Dependable Delivery, and you are working with liability transactions. There are three parts to this deliverable.

Part 1: A memo showing your understanding of liabilities Part 2: A select group of transactions for current and long-term liabilities Part 3: Calculating and interpreting debt ratio

Part 1: A memo to Sara Sara is a new intern working with you. Before she begins her work, you want to familiarize her with some basic items. You send Sara a memo explaining the following concepts to her in a Word document. Use APA citations and formatting where necessary.

In your own words, explain liabilities of a known amount, estimated liabilities, and contingent liabilities. Give specific examples of each liability type, and lastly, explain how Dan's Dependable Delivery will report each liability type.

In your own words, explain the accounting for bonds and the rationale behind the accounting. Give an example of when the company might issue a bond.

Calculate two consecutive years' debt ratio for Dan's Dependable Delivery. Explain the debt ratio and how it would be useful to Dan's Dependable Delivery. The numbers are given in Part 3.

Part 2: A variety of transactions for current and long-term liabilities Use the Excel journal template to record the following liability transactions. Use Excel formulas in the cells to show your calculations.

Date	Transaction
Year 1
January 5	Purchased equipment for $100,000, signing a 9-month, 7% note payable.
January 26	Recorded the week's sales of $80,000, 70% on account and 30% cash. All sales are subject to a 6% sales tax.
February 7	Remitted last week's sales tax to the appropriate government agency.
May 1	Borrowed $150,000 on a 5-year, 8% note payable calling for annual interest payments beginning next May 1.
October 1	Issued $100,000 5-year, 10%, semiannual bonds payable. The bonds were issued at 105.
October 5	Paid off the January 5 note payable.
November 30	Purchased inventory at a cost of $7,200, signing a 3-month, 6% note payable for that amount.
December 31	Accrued warranty expense is estimated at 3% of total sales of $900,000 (assume the sales were already recorded).
December 31	Record accrued interest on all outstanding notes and bonds payable (make a separate journal entry for each).
Year 2
February 28	Paid off the November 6% inventory note plus interest at maturity.
April 1	Paid the interest due on the semi-annual bonds.
May 1	Paid the interest for one year on the long-term note payable.

Part 3: Calculating and interpreting debt ratio

Given the following information, calculate the debt ratio for Dan's Dependable Delivery. Do your calculations at the end of the journal. Show your work.

	Current year	Previous year
Total Assets	$3,750,200	$3,590,750
Total Liabilities	$1,500,250	$1,470,000

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