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In: Accounting
Ratio of Liabilities to Stockholders' Equity and Times Interest Earned The following data were taken from...
Ratio of Liabilities to Stockholders' Equity and Times Interest Earned
The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years:
| Current Year | Previous Year | |||
| Accounts payable | $260,000 | $224,000 | ||
| Current maturities of serial bonds payable | 340,000 | 340,000 | ||
| Serial bonds payable, 10% | 1,680,000 | 2,020,000 | ||
| Common stock, $1 par value | 70,000 | 100,000 | ||
| Paid-in capital in excess of par | 840,000 | 840,000 | ||
| Retained earnings | 2,890,000 | 2,290,000 | ||
The income before income tax was $666,600 and $583,300 for the current and previous years, respectively.
a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place.
| Current year | |
| Previous year |
b. Determine the times interest earned ratio for both years. Round to one decimal place.
| Current year | |
| Previous year |
c. The ratio of liabilities to stockholders' equity has and the times interest earned ratio has from the previous year. These results are the combined result of a income before income taxes and interest expense in the current year compared to the previous year.
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Expert Solution
| Current year | Previous Year | |||
| Liabilities | Stock holder's equity | Liabilities | Stock holder's equity | |
| Accounts payable | $260,000 | $260,000 | ||
| Current maturities of serial bonds payable | $340,000 | $340,000 | ||
| Serial bonds payable, 10% | $1,680,000 | $2,020,000 | ||
| Common stock, $1 par value | $70,000 | $100,000 | ||
| Paid-in capital in excess of par | $840,000 | $840,000 | ||
| Retained earnings | $2,890,000 | $2,290,000 | ||
| Income before income tax | $666,600 | $583,300 | ||
| Total | $2,280,000 | $4,466,600 | $2,620,000 | $3,813,300 |
| a. ratio of liabilities to stockholders' equity at the end of each year | ||||
| = $ 2,280,000/ $ 4,466,600 | (Current year) | |||
| 0.510 | ||||
| = $ 2,620,000 / $3,813,300 | (Previous year) | |||
| 0.687 | ||||
| b. the times interest earned ratio for both years | ||||
| = Earnings before interest and tax / interest | (Current year) | |||
| = $ 834,600 / $168,000 | ||||
| 4.968 | ||||
| = $785,300 / $202,000 | (Previous year) | |||
| 3.888 | ||||
| Income before income tax | $666,600 | $583,300 | ||
| Interest expense | $168,000 | $202,000 | ||
| Earnings before interest and tax | $834,600 | $785,300 | ||
ekkarill92 answered 2 years agoRelated Solutions
Ratio of Liabilities to Stockholders' Equity and Times Interest Earned The following data were taken from...
Ratio of Liabilities to Stockholders' Equity and Times Interest
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The following data were taken from the financial statements of
Hunter Inc. for December 31 of two recent years:
Current
YearPrevious
Year
Accounts payable$622,000 $168,000
Current maturities of serial bonds payable380,000 380,000
Serial bonds payable, 10%1,560,000 1,940,000
Common stock, $1 par value70,000 90,000
Paid-in capital in excess of par810,000 810,000
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Ratio of Liabilities to Stockholders' Equity and Times Interest Earned The following data were taken from...
Ratio of Liabilities
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The following data
were taken from the financial statements of Hunter Inc. for
December 31 of two recent years:
Current Year
Previous Year
Accounts payable
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$198,000
Current maturities of serial bonds payable
460,000
460,000
Serial bonds payable, 10%
1,890,000
2,350,000
Common stock, $1 par value
90,000
110,000
Paid-in capital in excess of par
970,000
980,000
Retained earnings
3,360,000
2,670,000
The income before
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The following data were taken from the financial statements of
Hunter Inc. for December 31 of two recent years:
Current Year
Previous Year
Accounts payable
$552,000
$162,000
Current maturities of serial bonds payable
370,000
370,000
Serial bonds payable, 10%
1,520,000
1,890,000
Common stock, $1 par value
80,000
100,000
Paid-in capital in excess of par
900,000
900,000
Retained earnings
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2,460,000
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Ratio of Liabilities to Stockholders' Equity and Times Interest
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The following data were taken from the financial statements of
Hunter Inc. for December 31 of two recent years:
Current Year
Previous Year
Accounts payable
$604,000
$290,000
Current maturities of serial bonds payable
530,000
530,000
Serial bonds payable, 10%
2,370,000
2,900,000
Common stock, $1 par value
90,000
110,000
Paid-in capital in excess of par
960,000
970,000
Retained earnings
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2,640,000
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The following data were taken from the financial statements of
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Current Year
Previous Year
Accounts payable
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$193,000
Current maturities of serial bonds payable
410,000
410,000
Serial bonds payable, 10%
1,710,000
2,120,000
Common stock, $1 par value
90,000
120,000
Paid-in capital in excess of par
1,010,000
1,010,000
Retained earnings
3,480,000
2,760,000
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Previous Year
Accounts payable
$982,000
$229,000
Current maturities of serial bonds payable
580,000
580,000
Serial bonds payable, 10%
2,310,000
2,890,000
Common stock, $1 par value
100,000
120,000
Paid-in capital in excess of par
1,060,000
1,070,000
Retained earnings
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Camper Company and McSead, Inc., are the two largest toy
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McSead
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$3,246,000
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795,800
1,906,000
Total liabilities
$2,272,800
$5,152,000
Total stockholders' equity
3,788,000
6,440,000
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$6,060,800
$11,592,000
The income from operations and interest expense from the income
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Shareholders' equity:
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$860,000
Additional paid in capital
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Retained earnings
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3,251,000
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iii. Times burden covered ratio
b. What percentage decline in earnings before interest and taxes
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Recent balance sheet information for two companies in the food
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Madrid
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$816,800
Current liabilities
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599,208
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228,704
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256,270
321,820
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