On January 1 of this year, Denver Corporation sold bonds with a face value of $300,000 and

Question:

On January 1 of this year, Denver sold bonds with a of $300,000 and a rate of 6 percent. The bonds mature in 10 years and pay interest annually every December 31. At the time the bonds were issued, the annual market rate of interest was 6 percent. The company uses the effective-interest amortization method.
Required:
1. When the bonds were issued, did Denver's debt-to-equity ratio increase, decrease, or stay the same?
2. At the end of the first year, when Denver recorded its first interest expense and paid cash to investors for interest, did its debt-to-equity ratio increase, decrease, or stay the same?
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a... Face Value
Face value is a financial term used to describe the nominal or dollar value of a security, as stated by its issuer. For stocks, the face value is the original cost of the stock, as listed on the certificate. For bonds, it is the amount paid to the...