Question

In: Accounting

Exercise 9-14 Computing and interpreting times interest earned LO A1 Use the following information from separate...

Exercise 9-14 Computing and interpreting times interest earned LO A1

Use the following information from separate companies a through f:

Net Income (Loss) Interest Expense Income Taxes
a. $ 163,000 $ 55,420 $ 40,750
b. 157,600 36,248 56,736
c. 166,100 8,305 79,728
d. 138,550 33,252 58,191
e. 105,950 22,250 40,261
f. (45,640 ) 97,213 0
Times Interest Earned Ratio
Company Choose Numerator: / Choose Denominator: = Ratio
/ =
a / = 0 times
b / = 0 times
c / = 0 times
d / = 0 times
e / = 0 times
f / = 0 times

Solutions

Expert Solution

Answer in 2 decimal place

Times Interest Earned Ratio
Company Choose Numerator: / Choose Denominator: = Times Interest Earned Ratio
Income before interest and taxes / Interest expense = Times Interest Earned Ratio
a $ 259,170 / $ 55,420 =                 4.68 times
b $ 250,584 / $ 36,248 =                 6.91 times
c $ 254,133 / $ 8,305 =               30.60 times
d $ 229,993 / $ 33,252 =                 6.92 times
e $ 168,461 / $ 22,250 =                 7.57 times
f $ 51,573 / $ 97,213 =                 0.53 times

Answer in 1 decimal place

Times Interest Earned Ratio
Company Choose Numerator: / Choose Denominator: = Times Interest Earned Ratio
Income before interest and taxes / Interest expense = Times Interest Earned Ratio
a $ 259,170 / $ 55,420 =                   4.7 times
b $ 250,584 / $ 36,248 =                   6.9 times
c $ 254,133 / $ 8,305 =                 30.6 times
d $ 229,993 / $ 33,252 =                   6.9 times
e $ 168,461 / $ 22,250 =                   7.6 times
f $ 51,573 / $ 97,213 =                   0.5 times

Working

Company
Net income (A) Interest expense (B) Income taxes (C ) Income before interest and taxes (A+B+C)
a $ 163,000 $ 55,420 $ 40,750 $ 259,170
b $ 157,600 $ 36,248 $ 56,736 $ 250,584
c $ 166,100 $ 8,305 $ 79,728 $ 254,133
d $ 138,550 $ 33,252 $ 58,191 $ 229,993
e $ 105,950 $ 22,250 $ 40,261 $ 168,461
f -$ 45,640 $ 97,213 $ 0 $ 51,573

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