The following account balances are taken from the records of Monet€™s Garden Inc.:
Current liabilities ........... $150,000
Long-term liabilities ......... 375,000
Stockholders€™ equity ......... 400,000
Required
1. Use the information provided to compute Monet€™s debt-to-equity ratio (round to three decimal points).
2. Determine the effect that each of the following transactions will have on Monet€™s debt-to-equity ratio by recalculating the ratio and then indicating whether the ratio is increased, decreased, or not affected by the transaction. (Round to three decimal points.) Consider each transaction independently; that is, assume that it is the only transaction that takesplace.

Transcribed Image Text:

Effect of Transaction on Debt-to-Equity Ratio Transaction a. Purchased inventory on account, $20,000 b. Purchased inventory for cash, $15,000 c. Paid suppliers on account, 30,000 d. Received cash on account, $40,000 e. Paid insurance for next year, $20,000 f. Made sales on account, $60,000 g. Repaid short-term loans at bank, $25,000 h. Borrowed $40,000 at bank for 90 days i. Declared and paid $45,000 cash dividend j. Purchased $20,000 of short-term investments k. Paid $30,000 in salaries L Accrued additional $15,000 in taxes