Accounting (Text Only)
26th Edition
ISBN: 9781285743615
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 14, Problem 14.9APE
(a)
To determine
Times-Interest-Earned ratio: It is the ratio that quantifies a business ability to pay interest expense. It is calculated as shown below:
To calculate: Times-interest-earned ratio for the current year 2016 and the prior year 2015.
(b)
To determine
To compare: Times-interest-earned ratio of the current year 2016 from the prior year 2015.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
How do I calculate based on the Income Statement and Balance sheet below: Times Interest Earned =Earnings before interest & taxes/interest expense, gross?
(in thousands)
(in thousands)
2015
2014
Sales (net)
30,500
Cash
400
500
Interest income
500
Short-term investments
300
200
Total Revenue
31,000
Accounts receivable (net)
3,200
2,900
Cost and expenses
Inventory
6,000
5,400
Cost of goods sold
17,600
Total current assets
9,900
9,000
Selling and general administrative expenses
3,550
Property, plant, and equipment
7,100
7,000
Depreciation and amortization expenses
1,890
Total assets
17,000
16,000
Interest Expense
900
Accounts payable
3,700
3,400
Total costs and expenses
23,940
Income taxes payable
900
800
Income before taxes
7,060
Accrued expenses
1,700
1,400
Income taxes
-2,800
Total current liabilities
6,300
5,600
Net income
4,260
Long-term debt
2,000
1,800
Total liabilities
8,300
7,400
Common…
Balance Sheet at End of Year- figures in millions
Assets 2015 2016 Liability & Shareholder Equity 2015 2016
Current Assets $90 $140 $50 $60
Net fixes Asst. $800 $900 $600 $750
___________________________________________________________
Income Statement 2016
Revenue $1,950
Cost Goods $1,030
Depreciation $350
Interest expense $240
What are the taxes paid in 2016? Assume the firm pay taxes equal to 35% of taxable income.
What is cash provided by operations during 2016?
Net fixed assets increased form 800 to 900 during 2016, what was the gross investment in fixed assets in 2016?
The following information was available for the year ended December 31, 2016:
Earnings before interest and taxes (operating income)
$
120,000
Interest expense
30,000
Income tax expense
35,000
Net income
55,000
Total assets at year-end
400,000
Total liabilities at year-end
200,000
a. Calculate the debt ratio at December 31, 2016. (Round your answer to 1 decimal place.)
b. Calculate the debt/equity ratio at December 31, 2016.(Round your answer to 2 decimal places.)
c. Calculate the times interest earned for the year ended December 31, 2016.(Round your answer to 2 decimal places.)
Chapter 14 Solutions
Accounting (Text Only)
Ch. 14 - Describe the two distinct obligations incurred by...Ch. 14 - Explain the meaning of each of the following terms...Ch. 14 - If you asked your broker to buy you a 12% bond...Ch. 14 - Prob. 4DQCh. 14 - If bonds issued by a corporation are sold at...Ch. 14 - The following data relate to a 2,000,000, 8% bond...Ch. 14 - Bonds Payable has a balance of 5,000,000, and...Ch. 14 - What is a mortgage note?Ch. 14 - Fleeson Company needs additional funds to purchase...Ch. 14 - In what section of the balance sheet would a bond...
Ch. 14 - Prob. 14.1APECh. 14 - Alternative financing plans Brower co. is...Ch. 14 - Prob. 14.2APECh. 14 - Issuing bonds at face amount On January 1, the...Ch. 14 - Issuing bonds at a discount On the first day of...Ch. 14 - Issuing bonds at a discount On the first day of...Ch. 14 - Prob. 14.4APECh. 14 - Prob. 14.4BPECh. 14 - Prob. 14.5APECh. 14 - Prob. 14.5BPECh. 14 - Prob. 14.6APECh. 14 - Prob. 14.6BPECh. 14 - A Redemption of bonds payable A 1,500,000 bond...Ch. 14 - Prob. 14.7BPECh. 14 - Journalizing installment notes On the first day of...Ch. 14 - Journalizing installment notes On the first day of...Ch. 14 - Prob. 14.9APECh. 14 - Prob. 14.9BPECh. 14 - Effect of financing on earnings per share Domanico...Ch. 14 - Evaluate alternative financing plans Based on the...Ch. 14 - Prob. 14.3EXCh. 14 - Prob. 14.4EXCh. 14 - Entries for issuing bonds Gabriel Co. produces and...Ch. 14 - Prob. 14.6EXCh. 14 - Prob. 14.7EXCh. 14 - Prob. 14.8EXCh. 14 - Entries for issuing and calling bonds; gain Emil...Ch. 14 - Entries for installment note transactions On the...Ch. 14 - Prob. 14.11EXCh. 14 - Prob. 14.12EXCh. 14 - Reporting bonds At the beginning of the current...Ch. 14 - Prob. 14.14EXCh. 14 - Prob. 14.15EXCh. 14 - Prob. 14.16EXCh. 14 - Present value of amounts due Tommy John is going...Ch. 14 - Prob. 14.18EXCh. 14 - Prob. 14.19EXCh. 14 - Prob. 14.20EXCh. 14 - Prob. 14.21EXCh. 14 - Present value of bonds payable; premium Moss Co....Ch. 14 - Prob. 14.23EXCh. 14 - Appendix2 Amortize premium by interest method...Ch. 14 - Prob. 14.25EXCh. 14 - Prob. 14.26EXCh. 14 - Prob. 14.1APRCh. 14 - Prob. 14.2APRCh. 14 - Prob. 14.3APRCh. 14 - Entries for bonds payable and installment note...Ch. 14 - Prob. 14.5APRCh. 14 - Prob. 14.6APRCh. 14 - Effect of financing on earnings per share Three...Ch. 14 - Prob. 14.2BPRCh. 14 - Prob. 14.3BPRCh. 14 - Prob. 14.4BPRCh. 14 - Prob. 14.5BPRCh. 14 - Prob. 14.6BPRCh. 14 - Prob. 14.1CPCh. 14 - Ethics and professional conduct in business Solar...Ch. 14 - Prob. 14.3CPCh. 14 - Prob. 14.4CPCh. 14 - Prob. 14.5CPCh. 14 - Times interest earned The following financial data...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Real-world annual report The financial statements for Nike, Inc. (NKE), are presented in Appendix E at the end of the text. The following additional information is available (in thousands): Instructions 1. Determine the following measures for the fiscal years ended May 31, 2017, and May 31, 2016. Round ratios and percentages to one decimal place. a. Working capital b. Current ratio c. Quick ratio d. Accounts receivable turnover e. Number of days sales in receivables f. Inventory turnover g. Number of days sales in inventory' h. Ratio of liabilities to stockholders equity i. Asset turnover j. Return on total assets, assuming interest expense is 82 million for the year ending May 31. 2017, and 33 million for the year ending May 31, 2016. k. k. Return on common stockholders equity l. Price-eamings ratio, assuming that the market price was 52.81 per share on May 31, 2017, and 54.35 per share on May 31, 2016. m. m. Percentage relationship of net income to sales 2. What conclusions can be drawn from these analyses?arrow_forwardFinancial statement analysis The financial statements for Nike, Inc., are presented in Appendix D at the end of the text. Use the following additional information (in thousands): Instructions 1. Determine the following measures for the fiscal years ended May 31, 2016, and May 31, 2015. Round ratios and percentages to one decimal place. a. Working capital b. Current ratio c. Quick ratio d. Accounts receivable turnover e. Number of days sales in receivables f. Inventory turnover g. Number of days sales in inventory h. Ratio of liabilities to stockholders equity i. Asset turnover j. Return on total assets. k. Return on common stockholders equity l. Price-earnings ratio, assuming that the market price was 54.90 per share on May 29, 2016, and 52.81 per share on May 30, 2015 m. Percentage relationship of net income to sales 2. What conclusions can be drawn from these analyses?arrow_forwardCurrent Ratio Baldwin Corp. reported the following current accounts at the end of two recent years: Required Compute Baldwins current ratio at the end of each of the two years. How has Baldwins liquidity changed at the end of 2016 compared to the end of 2015? Comment on the relative composition of Baldwins current assets at the end of 2016 compared to the end of 2015.arrow_forward
- Juroe Company provided the following income statement for last year: Juroes balance sheet as of December 31 last year showed total liabilities of 10,250,000, total equity of 6,150,000, and total assets of 16,400,000. Required: Note: Round answers to two decimal places. 1. Calculate the times-interest-earned ratio. 2. Calculate the debt ratio. 3. Calculate the debt-to-equity ratio.arrow_forwardThe following data come from the financial records of Rundle Corporation for 2018: Sales $ 845,000 Interest expense 5,800 Income tax expense 28,500 Net income 23,000 Required How many times was interest earned in 2018?arrow_forwardCurrent Assets - 2015 - $316 2016 - $450 Net Fixed Assets - 2015 $1260 2016 - $1450 Current Liabilities - 2015 - $240 2016 - $246 Long-term Debt - 2015 - $860 2016 - $980 If company paid dividends of $130 million in 2016, no stock issued, what was net income during the year? How do you calculate? My Answer: Add current assets + net fixed assets + paid dividends 1,900 + 130 = 2,030 net income during the yeararrow_forward
- The following data come from the financial records of Zachary Corporation for 2018: Sales $ 845,000 Interest expense 5,100 Income tax expense 26,000 Net income 28,000 Required How many times was interest earned in 2018? (Round your answer to 2 decimal places.)arrow_forwardThe following data come from the financial records of Rundle Corporation for 2018: How many times was interest earned in 2018? Sales $ 845,000 Interest expense 5,800 Income tax expense 28,500 Net income 23,000arrow_forwardHow do I calculate times interest earned here? Fiscal year ended (in millions) Sept. 24, 2016 Sept. 26, 2015 Net sales $ 215,639 $ 233,715 Cost of sales 131,376 140,089 Gross margin 84,263 93,626 Operating expenses Research and development 10,045 8,067 Selling, general and administrative 14,194 14,329 Total operating expenses 24,239 22,396 Operating income 60,024 71,230 Interest and dividend income 3,999 2,921 Interest expense (1,456) (733) Other expense, net (1,195) (903) Income before provision for income taxes 61,372 72,515 Provision for income taxes 15,685 19,121 Net income $ 45,687 $ 53,394arrow_forward
- The formula for determining the number of times interest charges earned is Income before Income Tax + Interest Expense/Interest expense. Assume that the Interest Expense for Shine, Inc. for the Year Ended December 31, 2011, is $25,000. Assume further that Income before Income Taxes is $395,000, Income Taxes is $150,000 and Net Income is $245,000. What is the number of times interest charges are earned for Shine, Inc. for the Year Ended December 31, 2011? Group of answer choices 9.8 10.8 16.8 $25,000arrow_forwardConn Co. reported a retained earnings balance of $400,000 at December 31, 2015. In August 2016, Conn determined that insurance premiums of $60,000 for the three-year period beginning January 1, 2015, had been paid and fully expensed in 2015. Conn has a 30% income tax rate. What amount should Conn report as adjusted beginning retained earnings in its 2016 statement of retained earnings? a. $420,000 b. $428,000 c. $440,000 d. $442,000arrow_forwardUse the following information to answer this question. Windswept, Inc.2017 Income Statement($ in millions) Net sales $ 9,750 Cost of goods sold 7,800 Depreciation 355 Earnings before interest and taxes $ 1,595 Interest paid 94 Taxable income $ 1,501 Taxes 450 Net income $ 1,051 Windswept, Inc.2016 and 2017 Balance Sheets($ in millions) 2016 2017 2016 2017 Cash $ 250 $ 270 Accounts payable $ 1,480 $ 1,732 Accounts rec. 1,050 950 Long-term debt 1,040 1,228 Inventory 1,720 1,630 Common stock 3,300 3,000 Total $ 3,020 $ 2,850 Retained earnings 620 870 Net fixed assets 3,420 3,980 Total assets $ 6,440 $ 6,830 Total liab. & equity $ 6,440 $ 6,830 Windswept, Inc., has 520 million shares of stock outstanding. Its price–earnings ratio for 2017 is 20. What is the market price per share of stock?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Financial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningEBK CONTEMPORARY FINANCIAL MANAGEMENTFinanceISBN:9781337514835Author:MOYERPublisher:CENGAGE LEARNING - CONSIGNMENT
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningCentury 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
Financial Accounting
Accounting
ISBN:9781305088436
Author:Carl Warren, Jim Reeve, Jonathan Duchac
Publisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:9781337514835
Author:MOYER
Publisher:CENGAGE LEARNING - CONSIGNMENT
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License