Question

Income Statement

Year Ended July 31, 2018

Net Sales Revenue

$28,000

Cost of Goods Sold

10,800

Gross Profit

17,200

Operating Expenses:

Selling Expenses

$690

Administrative Expenses

1,550

Total Operating Expenses

2,240

Operating Income

14,960

Other Income and (Expenses):

Interest Expense

?

Total Other Income and (Expenses)

?

Net Income before Income Tax Expense

?

Income Tax Expense

2,810

Net Income

$ ?

The income statement for

UtahUtah

Communications follows. Assume

UtahUtah

Communications signed a​ 3-month,

9 %9%​,

$ 60 comma 000$60,000

note on

JuneJune

​1,

20182018​,

and that this was the only note payable for the company.

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​(Click the icon to view the income​ statement.)

Requirements

1.	Fill in the missing information for UtahUtah​'s year ended JulyJuly 3131​, 20182018​, income statement. Round to the nearest dollar.
2.	Compute the​ times-interest-earned ratio for the company. Round to two decimals.

Requirement 1. Fill in the missing information for

UtahUtah​'s

year ended

JulyJuly

3131​,

20182018​,

income statement. Round to the nearest dollar.​ (Use a​ 12-month year for interest computations. Use a minus sign or parentheses to enter other​ expenses.)

		Utah Communications
		Income Statement
		Year Ended July 31, 2018
Net Sales Revenue				$28,000
Cost of Goods Sold				(10,800)
Gross Profit				17,200
Operating Expenses:
	Selling Expenses		$690
	Administrative Expenses		1,550
	Total Operating Expenses			(2,240)
Operating Income				14,960
Other Income and (Expenses):
	Interest Expense
	Total Other Income and (Expenses)
Net Income before Income Tax Expense
Income Tax Expense				(2,810)
Net Income

Requirement 2. Compute the​ times-interest-earned ratio for the company. Round to two decimals.

Select the formula and enter the amounts to compute the​ times-interest-earned ratio. ​(Round your answer to two decimal​ places, X.XX.)

Times-interest-earned ratio

=

=

Answer 1

Interest expenses =

$60000×9% for two months (june & July)

=$5400×2÷12

= $900

Income tax is given in question= $2810

But rate of income tax not given, so we assume 21% corporate income tax as per US federal tax laws.

Therefore

Income before income tax =

$2810÷ 0.21= $13380

Other expenses = $680

(Income before tax - income after interest)

Net income after tax =$10570 (13380-2810)

(2) Time interest earned ratio =

Income before interest & Taxes ÷ Interest expenses.

Income before interest&taxes= Operating income - other expenses.

= $14960-$ 680= $14280

Interest=$900

Time interest earned ratio =$14280÷900= 15.87 times.