Balance sheet and income statement data indicate the following: Company ACompany BBonds payable, 8% (issued 2000, due 2024)$1,200,000$900,000Preferred 5% stock, $100 par (no change during year)300,000400,000Common stock, $50 par (no change during year)1,000,0001,000,000Income before income tax for year495,000130,000Income tax for year75,00012,000Common dividends paid50,0000Preferred dividends paid15,00020,000 a. For each company, what is the number of times bond interest charges were earned (round to one decimal place)?Company Afill in the blank 1Company Bfill in the blank 2b. Which company gives potential creditors the most protection?

Balance sheet and income statement data indicate in table : (a) For each company, what is the…

Answered: o change during year) 300,000 400,000…

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter3: Review Of A Company's Accounting System

Section: Chapter Questions

Problem 7E: Basic Income Statement The following are selected account balances of Rule Corporation at the end of...

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Balance sheet and income statement data indicate the following:

	Company A	Company B
Bonds payable, 8% (issued 2000, due 2024)	$1,200,000	$900,000
Preferred 5% stock, $100 par (no change during year)	300,000	400,000
Common stock, $50 par (no change during year)	1,000,000	1,000,000
Income before income tax for year	495,000	130,000
Income tax for year	75,000	12,000
Common dividends paid	50,000	0
Preferred dividends paid	15,000	20,000

a. For each company, what is the number of times bond interest charges were earned (round to one decimal place)?

Company A	fill in the blank 1
Company B	fill in the blank 2

b. Which company gives potential creditors the most protection?

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