Which of the following misstatements would cause the debt-to-assets ratio to be overstated?
A)Capitalizing costs that should have been expensed as assets.
B)Failing to adjust for depreciation in the current period.
C)Failing to accrue income taxes of the current period.
D)Failing to accrue interest earned of the current period.

Question

Quizplus · Accepted Answer

The debt-to-assets ratio is calculated by dividing total liabilities by total assets.Overstating assets by recording costs as assets that should have been expensed or by failing to increase accumulated depreciation will understate the debt-to-assets ratio.Understating liabilities by failing to accrue income taxes will also understate the debt-to-assets ratio.Failing to accrue interest earned will understate assets and will overstate the debt-to-assets ratio.

Which of the Following Misstatements Would Cause the Debt-To-Assets Ratio