Question
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 | $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 | 3,330,000 | 2,640,000 | ||
The income before income tax was $1,044,000 and $913,500 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.
Solutions
Expert Solution
| a | |||||
| Current Year | Previous Year | ||||
| Accounts payable | 604000 | 290000 | |||
| Current maturities of serial bonds payable | 530000 | 530000 | |||
| Serial bonds payable, 10% | 2370000 | 2900000 | |||
| Total liabilities | 3504000 | 3720000 | |||
| Current Year | Previous Year | ||||
| Common stock, $1 par value | 90000 | 110000 | |||
| Paid-in capital in excess of par | 960000 | 970000 | |||
| Retained earnings | 3330000 | 2640000 | |||
| Total stockholders' equity | 4380000 | 3720000 | |||
| Ratio of liabilities to stockholders' equity: | |||||
| Current year | 0.8 | =3504000/4380000 | |||
| b | 1 | =3720000/3720000 | |||
| b | |||||
| Interest expense: | |||||
| Current year | 290000 | =(530000+2370000)*10% | |||
| Previous year | 343000 | =(530000+2900000)*10% | |||
| Times interest earned ratio : | |||||
| Current year | 4.6 | =(1044000+290000)/290000 | |||
| Previous year | 3.7 | =(913500+343000)/343000 | |||
| c | |||||
| The ratio of liabilities to stockholders' equity has improved and the times interest earned ratio has improved from the previous year. | |||||
| These results are the combined result of a larger income before income taxes and lower interest expense in the current year compared to the previous year. | |||||
ekkarill92 answered 1 year agoRelated Solutions
Ratio of Liabilities to Stockholders' Equity and Times Interest Earned The following data were taken from...
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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
Retained earnings2,780,000 2,210,000
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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
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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
income tax was $564,000 and $493,500 for...
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
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Current Year
Previous Year
Accounts payable
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$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...
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
$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
3,090,000
2,460,000
The income before income tax was $529,200 and $463,100 for...
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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
$628,000
$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
The income before income tax was $572,400 and $500,900 for...
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Current Year
Previous Year
Accounts payable
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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
3,680,000
2,920,000
The income before income tax was $809,200 and...
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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
$464,000
$286,000
Current maturities of serial bonds payable
470,000
470,000
Serial bonds payable, 10%
2,230,000
2,700,000
Common stock, $1 par value
90,000
110,000
Paid-in capital in excess of par
990,000
1,000,000
Retained earnings
3,440,000
2,730,000
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Camper Company and McSead, Inc., are the two largest toy
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Camper
McSead
Current liabilities
$1,477,000
$3,246,000
Long-term debt
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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Hasbro
Mattel
Liabilities:
Current liabilities
$2,742,000
$4,818,000
Long-term debt
1,476,000
1,912,000
Other liabilities
_
918,000
Total liabilities
$4,218,000
$7,648,000
Shareholders' equity:
Common stock
$191,000
$860,000
Additional paid in capital
591,000
3,155,000
Retained earnings
3,675,000
3,251,000
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a. For the years 2005–2009, calculate Boeing’s: i. Total liabilities-to-equity ratio ii. Times interest earned ratio...
a. For the years 2005–2009, calculate Boeing’s:
i. Total liabilities-to-equity ratio
ii. Times interest earned ratio
iii. Times burden covered ratio
b. What percentage decline in earnings before interest and taxes
could Boeing have sustained in these years before failing to
cover:
i. Interest and principal repayment requirements?
ii. Interest, principal, and common dividend payments?
c. What do these calculations suggest about Boeing’s financial
leverage during this period?
I am aware that this question has been submitted and answered by...
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