A private compamy has two debt covenants in place

a maximum debt to equity ratio: current and long term liabilities excluding future income taxes are divided by total shareholders equity

b minimum times interest earned ratio: income before interest and taxes is divided by total interest expense

For each accounting policy indicate what would be affected and whether the policy would increase or decrease

$1.$ Depreciation method is straight line rather than declining balance

$2$ costs that might be deffered and written offf or expensed immediatkey are expensed immediately

$3.$ Interest expense might be measured using straight line amortization for the debt discount alternatively the effective interest rate method might be used. The straight line method results in lower interest expense in the early years and is the choosen policy

$4.$ An issue of preffered shares that has the characteristics of debt $($ guaranteed cash flowe tk the investor$)$ is reclassified from equity to debg

$5.$ Warrenty expense js accrued as sales are made rather than expensing it as warranty claims are paid.

$6.$ Revenue is recorded as goods are delivered rather then when cash is later collected