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11 February, 03:41

Bonds payable, 8% (due in 15 years) $1,459,536 Preferred 8% stock, $100 par (no change during the year) $200,000 Common stock, $50 par (no change during the year) $1,000,000 Income before income tax for year $328,796 Income tax for year $98,639 Common dividends paid $60,000 Preferred dividends paid $16,000 Based on the data presented above, what is the times interest earned ratio (round to two decimal places) ?

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  1. 11 February, 06:20
    0
    3.82 times

    Explanation:

    The computation of times interest earned ratio is shown below:-

    Bond Interest charges Earned = Bond Value * Interest Rate

    = $1,459,536 * 8%

    = $116,762.88

    Net Income before Interest = Net Income Income Before Interest + Interest

    = $328,796 + $116,762.88

    = $445,558.88

    Number of times bond interest charges were earned = Net Income before Interest and taxes : Interest charges

    = $445,558.88 : $116,762.88

    = 3.82 times
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