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

Question 13

Matching

Match each transaction to the effect on the debt/equity ratio

Premises:

Responses:

Amortized the discount of the long-term note payable

Increase in debt/equity ratio

A portion of long-term debt is paid

Decrease in debt/equity ratio

Accrued salaries at yearend

Does not change debt/equity ratio

Paid payroll taxes which were accrued last month

Paid a bonus amounting to 5% on reported income to the CEO that was previously accrued

Paid costs associated with warranties that were previously accrued

Paid taxes which were accrued

Accrued income taxes at yearend

Accrued estimated coupon redemptions

Premises:

Amortized the discount of the long-term note payable

A portion of long-term debt is paid

Accrued salaries at yearend

Paid payroll taxes which were accrued last month

Paid a bonus amounting to 5% on reported income to the CEO that was previously accrued

Paid costs associated with warranties that were previously accrued

Paid taxes which were accrued

Accrued income taxes at yearend

Accrued estimated coupon redemptions

Responses:

Increase in debt/equity ratio

Decrease in debt/equity ratio

Does not change debt/equity ratio

Correct Answer:

Premises:

Responses:

Amortized the discount of the long-term note payable

A portion of long-term debt is paid

Accrued salaries at yearend

Paid payroll taxes which were accrued last month

Paid a bonus amounting to 5% on reported income to the CEO that was previously accrued

Paid costs associated with warranties that were previously accrued

Paid taxes which were accrued

Accrued income taxes at yearend

Accrued estimated coupon redemptions