Question

What is the number of times preferred dividends were earned for the following data? Total current liabilities (noninterest bearing) - $300,000; bonds payable, 5% (issued in 2007, due in 20 years) - $600,000; preferred 6% stock, $200 par - $240,000; common stock, $20 par - $480,000; premium on common stock - $120,000; retained earnings - $420,000. Income before income taxes was $180,000 and income taxes were $78,000 for the current year.

Answer 1

Answer:

Times preferred dividends eared: 7.08333

Explanation:

income before taxes - taxes = net income

180,000 - 78,000 = 102,000

preferred dividends:

outstanding preferred shares x yield

$ 240,000 x 6% = $14,400

Times dividends earned:

102,000 / 14,400  = 7.08333333333