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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 Previous Year Year Accounts payable $344,000 $300,000 Current maturities of serial bonds payable 440,000 440,000 Serial bonds payable, 10% 2,180,000 2,620,000 Common stock, $1 par value 100,000 130,000 Paid-in capital in excess of par Retained earnings 1,090,000 1,090,000 3,750,000 2,980,000 The income before income tax expense was $681,200 and $596,000 for the current and previous years, respectively. a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round your answers to one decimal place. Current year 0.6 0.8 Previous year b. Determine the times interest earned ratio for both years. Round your answers to one decimal place. Current year Previous year 3.6 V 2.3 X c. The ratio of liabilities to stockholders' equity has improved charges were earned has improved and the number of times bond interest larger income before income taxes and lower from the previous year. These results are the combined result of a interest expense in the current year compared to the previous year. Feedback Check My Work a. Divide total liabilities by total stockholders' equity. b. Divide the sum of income before income tax expense and interest expense by interest expense. c. Consider the relationship of the accounts involved.

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 Previous Year Year Accounts payable $344,000 $300,000 Current maturities of serial bonds payable 440,000 440,000 Serial bonds payable, 10% 2,180,000 2,620,000 Common stock, $1 par value 100,000 130,000 Paid-in capital in excess of par Retained earnings 1,090,000 1,090,000 3,750,000 2,980,000 The income before income tax expense was $681,200 and $596,000 for the current and previous years, respectively. a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round your answers to one decimal place. Current year 0.6 0.8 Previous year b. Determine the times interest earned ratio for both years. Round your answers to one decimal place. Current year Previous year 3.6 V 2.3 X c. The ratio of liabilities to stockholders' equity has improved charges were earned has improved and the number of times bond interest larger income before income taxes and lower from the previous year. These results are the combined result of a interest expense in the current year compared to the previous year. Feedback Check My Work a. Divide total liabilities by total stockholders' equity. b. Divide the sum of income before income tax expense and interest expense by interest expense. c. Consider the relationship of the accounts involved.

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 13E: Ratio of liabilities to stockholders equity and times interest earned The following data were taken...
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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 Previous Year Year Accounts payable $344,000 $300,000 Current maturities of serial bonds payable 440,000 440,000 Serial bonds payable, 10% 2,180,000 2,620,000 Common stock, $1 par value 100,000 130,000 Paid-in capital in excess of par Retained earnings 1,090,000 1,090,000 3,750,000 2,980,000 The income before income tax expense was $681,200 and $596,000 for the current and previous years, respectively. a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round your answers to one decimal place. Current year 0.6 0.8 Previous year b. Determine the times interest earned ratio for both years. Round your answers to one decimal place. Current year Previous year 3.6 V 2.3 X c. The ratio of liabilities to stockholders' equity has improved charges were earned has improved and the number of times bond interest larger income before income taxes and lower from the previous year. These results are the combined result of a interest expense in the current year compared to the previous year. Feedback Check My Work a. Divide total liabilities by total stockholders' equity. b. Divide the sum of income before income tax expense and interest expense by interest expense. c. Consider the relationship of the accounts involved.
Transcribed Image Text: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 Previous Year Year Accounts payable $344,000 $300,000 Current maturities of serial bonds payable 440,000 440,000 Serial bonds payable, 10% 2,180,000 2,620,000 Common stock, $1 par value 100,000 130,000 Paid-in capital in excess of par Retained earnings 1,090,000 1,090,000 3,750,000 2,980,000 The income before income tax expense was $681,200 and $596,000 for the current and previous years, respectively. a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round your answers to one decimal place. Current year 0.6 0.8 Previous year b. Determine the times interest earned ratio for both years. Round your answers to one decimal place. Current year Previous year 3.6 V 2.3 X c. The ratio of liabilities to stockholders' equity has improved charges were earned has improved and the number of times bond interest larger income before income taxes and lower from the previous year. These results are the combined result of a interest expense in the current year compared to the previous year. Feedback Check My Work a. Divide total liabilities by total stockholders' equity. b. Divide the sum of income before income tax expense and interest expense by interest expense. c. Consider the relationship of the accounts involved.
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