Rudy Company Has Total Assets, Liabilities, and Shareholders' Equity of $28,000

Multiple Choice

Rudy Company has total assets, liabilities, and shareholders' equity of $28,000, $21,000, and $7,000, respectively. Assume no material change occurred during the year to totals on the balance sheet. What amount of long-term debt must Rudy exchange for new shares of common stock issued in order to decrease its debt/equity ratio to 1.0?

A) $17,500
B) $7,000
C) $14,000
D) $21,000