Question

Hsu Company reported the following on its income statement: Income before income taxes $302,634 Income tax expense 90,790 Net income $211,844 Interest expense was $63,228. Hsu Company's times interest earned ratio (rounded to two decimal places) is a.3.35 times b.4.79 times c.2.35 times d.5.79 times

Answer 1

Answer:

5.79  times

Explanation:

The times interest earned ratio tells us the number of times the company's made earnings in multiple of its debt interest obligation.

The formula for times earned interest ratio is the income before interest and taxes divided by the interest expense.

income before tax is $302,634

income before interest and taxes= $302,634+$63,228=$365,862.00  

times interest earned ratio=$365,862.00/ $63,228= 5.79  times