6.For each transaction numbered 1 through 5 below, identify which effect(s) (a through d) that each transaction would have on the current and debt/equity ratios. You may use each letter more than once or not at all. Some transactions have two answers.
| Effects |
| a.Decreases current ratio |
| b.Increases current ratio |
| c.Decreases debt/equity ratio |
| d.Increases debt/equity ratio |
____1.Equipment is purchased by incurring a long-term note payable and paying the balance in cash
____2.Paid for transportation of equipment shipped from a supplier
____3.Depreciated the equipment during the first year of use
____4.Paid for lubrication and periodic maintenance of the equipment
____5.Sold the equipment, receiving more money than its book value
7.For each transaction numbered 1 through 6 below, identify which accounting treatment—capitalized or expensed—should be used to properly account for the transactions. You may use each letter more than once or not at all.
| Accounting Treatments |
| E.Expensed immediately |
| C.Capitalized as part of the cost of the new asset |
______1.Freight costs on production equipment in transit
______2.Sales tax on equipment purchase
______3.Damaged during installation and repair costs
______4.Interest paid on construction loan during the building period
______5.Survey costs by contractor
______6.Construction insurance to cover theft or vandalism during building construction