Chapter 10, Problem 14ME

Analyzing the Impact of Transactions on the Debt-to-Assets Ratio

BSO, Inc., has assets of $600,000 and liabilities of $450,000, resulting in a debt-to-assets ratio of 0.75. For each of the following transactions, determine whether the debt-to-assets ratio will increase, decrease, or remain the same. Each item is independent.

1. a. Purchased $20,000 of new inventory on credit.
2. b. Paid accounts payable in the amount of $50,000.
3. c. Recorded accrued salaries in the amount of $100,000.
4. d. Borrowed $250,000 from a local bank, to be repaid in 90 days.