Sheehan, Inc. provides the following income statement for 2017:

Net Sales $240,000

Cost of Goods Sold 110,000

Gross Profit $130,000

Operating Expenses:

Selling Expenses 45,000

Administrative Expenses 12,000

Total Operating Expenses 57,000

Operating Income $73,000

Other Revenues and (Expenses):

Loss on Sale of Capital Assets (27,000)

Interest Expense (1,000)

Total Other Revenues and (Expenses) (28,000)

Income Before Income Taxes $45,000

Income Tax Expense 5,300

Net Income $39,700

Calculate the times-interest-earned ratio. (Round your answer to two decimal places.)

A. 46.00 times

B. 45.00 times

C. 39.70 times

D. 7 3.00 times

Question

Business

Priscilla

1 February, 12:14

Sheehan, Inc. provides the following income statement for 2017:

Net Sales $240,000

Cost of Goods Sold 110,000

Gross Profit $130,000

Operating Expenses:

Selling Expenses 45,000

Administrative Expenses 12,000

Total Operating Expenses 57,000

Operating Income $73,000

Other Revenues and (Expenses):

Loss on Sale of Capital Assets (27,000)

Interest Expense (1,000)

Total Other Revenues and (Expenses) (28,000)

Income Before Income Taxes $45,000

Income Tax Expense 5,300

Net Income $39,700

Calculate the times-interest-earned ratio. (Round your answer to two decimal places.)

A. 46.00 times

B. 45.00 times

C. 39.70 times

D. 7 3.00 times

+2

Answers (1)

Know the Answer?

Victor Reeves · Answer 1

Option (A) is correct.

Explanation:

Times-interest-earned ratio refers to the ratio of Earning before interest and taxes to the interest expenses.

Times interest earned ratio:

= Earning before interest and taxes : Interest expenses

= (Income Before Income Taxes + Interest Expense) : Interest expenses

= ($45,000 + $1000) : $1000

= 46 times