Balance sheet and income statement data indicate the following: Bonds payable, 7
ID: 2827413 • Letter: B
Question
Balance sheet and income statement data indicate the following:
Bonds payable, 7% (this is year 4 of 20 years)
Preferred 8% stock, $100 par (no change during the year)
$1,200,000
200,000
Common stock, $50 par
(no change during the year)
1,000,000
Income before income tax for year
340,000
Income tax for year
80,000
Interest Expense
84,000
Common dividends paid
60,000
Preferred dividends paid
16,000
Based on the data presented above, what is the number of times interest charges were earned (round to two decimal places)?
Bonds payable, 7% (this is year 4 of 20 years)
Preferred 8% stock, $100 par (no change during the year)
$1,200,000
200,000
Common stock, $50 par
(no change during the year)
1,000,000
Income before income tax for year
340,000
Income tax for year
80,000
Interest Expense
84,000
Common dividends paid
60,000
Preferred dividends paid
16,000
Explanation / Answer
the number of times interest charges were earned = (340 + 84)/84
the number of times interest charges were earned = 5.05
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