(Consider completing this problem after Problem 13-1A to ensure that you obtain a clear understanding of the effect of various transactions on this measure of solvency.) The following account balances are taken from the records of Degas Inc.:

Current liabilities .................................$ 25,000
Long-term liabilities .............................125,000
Stockholders’ equity .............................400,000

Required
1. Use the information provided to compute Degas’s debt-to-equity ratio (round to three decimal points).
2. Determine the effect that each of the following transactions will have on Degas’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 takes place.

Transaction                                                                                                            Effect of Transaction on
                                                                                                                                    Debt-to-Equity Ratio
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