The following transactions and events took place at MRI Company during its recent calendar-year reporting period....

The following transactions and events took place at MRI Company during its recent calendar-year reporting period.

In September 2011, MRI sold $140,000 of merchandise covered by a 180-day warranty. Prior experience shows that costs of the warranty equal 5% of sales. Compute September’s warranty expense and prepare the adjusting journal entry for the warranty.
On October 12, 2011, MRI arranged with a supplier to replace MRI’s overdue $10,000 account payable by paying $2,500 cash and signing a note for the remainder. The note matures in 90 days and has a 12% interest rate. Prepare the entries recorded on October 12, December 31, and January 10, 2010 related to this transaction.
For this calendar year, MRI’s net income is $1,000,000, its interest expense is $275,000, and its income taxes expense is $225,000. Calculate the Times Interest Earned Ratio. How would you assess the credit risk of this company?

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