Question

Check my work BSO, Inc., has assets of $790,000 and liabilities of $592,500 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, and enter the value of the new debt-to-assets ratio. Each item is independent. (Round your answers to 2 decimal places.) Debt-to-Assets Ratio a. Purchased $58,000 of new inventory on credit. b. Paid accounts payable in the amount of $107,000. c. Recorded accrued salaries in the amount of $195,000 d. Borrowed $345.000 from a local bank, to be repaid in 90 days.

Answer 1

	Transactions	Existing		Addition		Revised		New debt-to-assets Ratio	Debt-to-assets Ratio will
		Assets	Liabilities	Assets	Liabilities	Assets	Liabilities
a	Purchased $58,000 of new inventory on credit	$ 790,000	$ 592,500	$ + 58,000	$ + 58,000	$   848,000	$ 650,500	0.77	Increase
b	Paid accounts Payable in the amount of $107,000	$ 790,000	$ 592,500	$ -107,000	$ - 107,000	$   683,000	$ 485,500	0.71	Decrease
c	Recorded accrued salaries in the amount of $195,000	$ 790,000	$ 592,500	$ Nil	$ + 195,000	$   790,000	$ 787,500	1.00	Increase
d	Borrowed $345,000 from a local bank, to be repaid in 90 days	$ 790,000	$ 592,500	$ + 345,000	$ + 345,000	$ 1,135,000	$ 937,500	0.83	Increase