Question

In a recent year Sunland Company had net income of $360000, interest expense of $72000, and a times interest earned of 10. What was Sunland Company’s income before taxes for the year? $792000 $720000 $648000 None of these answer choices are correct.

Answer 1

Answer:

$648,000

Explanation:

Given that;

Net income = $360,000

Interest expense = $72,000

Times interest earned = 10

Net Income + Interest expense + Tax expense ÷ Interest expense = Times interest earned.

($360,000 + $72,000 + Tax expense) /$72,000 = 10

Tax expense = $288,000

Therefore;

Sunderland's income before taxes for the year

= Net income + Tax expense

= $360,000 + $288,000

= $648,000