14-9 14-2 Times interest earned Berry Company reported the following on the comp

Question

14-9 14-2 Times interest earned

Berry Company reported the following on the company's income statement in two recent years:

    Current Year

    Prior Year

Interest expense

$450,000

$540,000

Income before income tax expense

6,435,000

7,992,000

a. Determine the number of times interest charges were earned for current Year and prior Year. Round to one decimal place.

Current Year

Prior Year

b. Is the number of times interest charges are earned improving or declining?

    Current Year

    Prior Year

Interest expense

$450,000

$540,000

Income before income tax expense

6,435,000

7,992,000

Explanation / Answer

Part -(a) Number of times interest charges are earned = (Income before income tax + interest expense) / interest expense) Current year = (6,435,000+450,000) / 450,000 = 15.79 Prior year = (7,992,000+540,000) / 540,000 = 15.80 Part - (b) Number of times interest charges are declining

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