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svlad2 [7]
1 year ago
14

In the current year, Pringle Company reported Sales of $ 1,420,000 , Interest Expense of $ 12,000 , Income Tax Expense of $ 13,0

00 , and Net Income of $ 52,000 . What is Pringle's times interest earned ratio?
Business
2 answers:
mash [69]1 year ago
8 0

In the current year, Pringle Company reported Sales of $ 1,420,000 , Interest Expense of $ 12,000 , Income Tax Expense of $ 13,000 , and Net Income of $ 52,000 .

If we are single and a wage earner with an annual salary of $45,000, your federal income tax liability will be approximately $4700. Social security and medicare tax will be approximately $3,400.

A higher times interest earned ratio is favorable because it means that the company presents less of a risk to investors and creditors in terms of solvency. From an investor or creditor's perspective an organization that has a times interest earned ratio greater than 2.5 is considered an acceptable risk.

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yKpoI14uk [10]1 year ago
7 0

Times interest earned ratio = earnings before interest and taxes/interest expense

- Earnings before interest and taxes = Net income + interest expense + tax expense

Earnings before interest and taxes = 52,000 + 12,000 + 13,000 = $77,000

- interest expense = $12,000

Therefore, the Times interest earned ratio = earnings before interest and taxes/interest expense

Times interest earned ratio = 77,000 / 12,000

Times interest earned ratio = 6.42

The lower the interest coverage ratio, the more the business enterprise's debt and the opportunity of financial ruin. Intuitively, a decrease ratio suggests that much less running earnings are to be had to meet hobby bills and that the company is extra prone to unstable interest costs

Typically, a hobby insurance ratio of a minimum of two is taken into consideration as the minimum suitable quantity for an agency that has strong, constant sales. In contrast, an insurance ratio below one suggests a corporation cannot meet its cutting-edge hobby payment responsibilities and, therefore, isn't in top monetary fitness.

Learn more about interest ratio here:

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Answer:

$50,153,400

Explanation:

The formula is to increase the income tax expense for the year by any decrease in income tax payable or decrease income tax expense by any increase in income tax payable for the year

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Step 2: Decrease the Reported Income Tax by the Increase in Income Tax payable as calculated in Step 1.

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