Chestnut,Inc.reported the following balances on its balance sheet at December 31,Year 1:

On January 1,Year 2,Chestnut purchased equipment for $40,000 on account.What is the company's debt-to-assets ratio immediately after the purchase of the equipment?
A)0.42
B)0.46
C)0.37
D)0.34

Question

Chestnut,Inc.reported the following balances on its balance sheet at December 31,Year 1:

On January 1,Year 2,Chestnut purchased equipment for $40,000 on account.What is the company's debt-to-assets ratio immediately after the purchase of the equipment?
A)0.42 
B)0.46 
C)0.37 
D)0.34

Quizplus · Accepted Answer

This transaction increases equipment,an asset,and accounts payable,a liability.
Debt-to-assets ratio = Total debt ÷ Total assets
Debt-to-assets ratio = ($170,000 + $40,000)÷ ($460,000 + $40,000)= 0.42