Ratio of Liabilities to Stockholders\' Equity and Number of Times Interest Earne
ID: 2607849 • Letter: R
Question
Ratio of Liabilities to Stockholders' Equity and Number of Times Interest Earned The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years: Current Year $656,000 570,000 2,590,000 90,000 1,050,000 3,630,000 Previous Year $320,000 570,000 3,160,000 120,000 1,050,000 2,880,000 Accounts payable Current maturities of serial bonds payable Senai bonds payable, 10% Common stock, $1 par value Paid-in capital in excess of par Retained earnings The income before income tax was $853,200 and $746,600 for the current and previous years, respectively a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place. Current year Previous year b. Determine the times interest earned ratio for both years. Round to one decimal place Current year Previous year c. The ratio of liabilities to stockholders' equity has from the previous year. These results are the combined result of a in the current year compared to the previous year and the number of times bond interest charges were earned has income before income taxes and interest expenseExplanation / Answer
a). Ratio of Liabilities to Stockholder's:-
b).
(($570000+$2590000)*10%)
=$316000
(($570000+$3160000)*10%)
=$373000
c. The Ratio of Liabilities to stockholder's equity has Improved and the number of times bond interest charges were
earned has Improved from the previous year. These results are the combined result of a Increase in income
before income tax and Reduction in Interest Expense in the current year compared to the Previous Year.
Liabilities and Shareholder's Equity Current Previous Accounts Payable $656000 $320000 Current Maturities of Serial Bonds Payable $570000 $570000 Serial Bonds Payable, 10% $2590000 $3160000 Total Liabilities (A) $3816000 $4050000 Common Stock, $10 par $90000 $120000 Paid in Capital in Excess of par $1050000 $1050000 Retained Earning $3630000 $2880000 Shareholder's Equity (B) $4770000 $4050000 Ratio of Liabilities to Shareholder's Equity (A / B) 0.80 1.00Related Questions
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