Solved

Match Each Transaction to Its Effect on the Debt/equity Ratio

Question 79

Matching

Match each transaction to its effect on the debt/equity ratio You may use each choice more than once or not at all

Premises:

Responses:

Issued a bond payable at a discount

Increase in debt/equity ratio

Issued a non-interest-bearing note at a discount

Decrease in debt/equity ratio

Issued an interest-bearing note at a premium

Does not change debt/equity ratio

Amortized discount to interest expense

Paid interest on bonds payable that was issued at par

Market value of bonds payable increased after issue date

Retired a bond issue by paying cash

Premises:

Issued a bond payable at a discount

Issued a non-interest-bearing note at a discount

Issued an interest-bearing note at a premium

Amortized discount to interest expense

Paid interest on bonds payable that was issued at par

Market value of bonds payable increased after issue date

Retired a bond issue by paying cash

Responses:

Increase in debt/equity ratio

Decrease in debt/equity ratio

Does not change debt/equity ratio

Correct Answer:

Premises:

Responses:

Issued a bond payable at a discount

Issued a non-interest-bearing note at a discount

Issued an interest-bearing note at a premium

Amortized discount to interest expense

Paid interest on bonds payable that was issued at par

Market value of bonds payable increased after issue date

Retired a bond issue by paying cash