Question

Gil's Fish and Tackle, Inc. Balance Sheet At December 31, 2018
Assets
Cash	$	28,500
Accounts Receivable (less allowance)		208,800
Inventories		154,900
Property, Plant and Equipment		282,800
Long-term Investments		210,000
Total Assets	$	885,000
Liabilities
Accounts Payable	$	58,200
Current Portion of Long-Term Debt		81,400
Long-Term Notes Payable		139,000
Total Liabilities		278,600
Stockholders' Equity
Contributed Capital		460,000
Retained Earnings		146,400
Total Stockholders’ Equity		606,400
Total Liabilities and Stockholders’ Equity	$	885,000

Gil's Fish and Tackle, Inc. Income Statement For the year ending December 31, 2018
Sales Revenue	$	3,305,000
Operating Expenses
Salaries and Wages Expense		2,012,500
Operating and Admin. Expenses		340,700
Depreciation Expense		394,800
Operating Expenses		2,748,000
Operating Income		557,000
Other Expenses
Interest Expense		20,850
Income Before Income Tax Expense		536,150
Income Tax Expense		198,376
Net Income	$	337,774

Required:

Calculate the debt-to-assets ratio and the times interest earned. (Round your answers to 2 decimal places.)

Answer 1

Answers as below:

Debt to assets ratio = Total Debts / Total assets

= Current portion of Long-Term Debt + Long-Term Notes payable / Total assets

= (81400+139000)/885000

= 0.25

Times interest earned = Earnings before Interest and Taxes / Interest expense

= (Income before income tax expenses + interest expense) / Interest expense

= (536150+20850)/20850

= 26.71