Balance sheet and income statement data indicate the following: Bonds payable, 9% (due in 15 years)...
Balance sheet and income statement data indicate the following:
| Bonds payable, 9% (due in 15 years) | $1,092,269 |
| Preferred 8% stock, $100 par | |
| (no change during the year) | $200,000 |
| Common stock, $50 par | |
| (no change during the year) | $1,000,000 |
| Income before income tax for year | $408,891 |
| Income tax for year | $122,667 |
| Common dividends paid | $60,000 |
| Preferred dividends paid | $16,000 |
Based on the data presented above, what is the times interest earned ratio (round to two decimal places)?
Homework Answers
Bonds payable, 9% = $1,092,269
Interest expense = 1,092,269 x 9%
= $98,304
Income before income tax = $408,891
Times earned ratio = (Income before income tax + Interest expense)/Interest expense
= (408,891+98,304)/98,304
= 5.16
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