Hydro Company Balance Sheet December 31, 2020 Cash $ 40,000 Current Liabilities $ 80,000 Accounts Rec....
Hydro Company Balance Sheet December 31, 2020 Cash $ 40,000 Current Liabilities $ 80,000 Accounts Rec. (net) 80,000 10% Bonds payable 120,000 Inventory 130,000 Common Stock 200,000 Plant & Equip. (net) 250,000 Retained earnings 100,000 Total Assets $500,000 Total Liab. and S/H/E $500,000 Sales revenues for 2020 were $800,000, gross profit was $320,000, and net income was $36,000. The income tax rate was 40 percent. One year ago, accounts receivable (net) were $76,000, inventory was $110,000, total assets were $460,000, and stockholders' equity was $260,000. The bonds payable were outstanding all year and the 2020 interest expense was $12,000. What is the firm's times-interest-earned for 2020? Select one: a. 5 b. 3 c. 6 d. 4
Homework Answers
| Ans. | Option c 6 | |||
| Time interest earned =(Income before taxes + Interest expenses) / Interest expenses | ||||
| ($60,000 + $12,000) / $12,000 | ||||
| $72,000 / $12,000 | ||||
| 6.00 | times | |||
| *Calculations for income before taxes : | ||||
| Income before taxes = Net income / (1 - Tax rate) | ||||
| $36,000 / (1 - 0.40) | ||||
| $36,000 / 0.60 | ||||
| $60,000 |
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Hydro Company Balance Sheet December 31, 2020 Cash $ 40,000
Current Liabilities $ 80,000 Accounts Rec....
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