The Balance Sheet and Income Statement for the Year Ended

question 10

Multiple Choice

The balance sheet and income statement for the year ended 2016 indicate the following: ? $\begin{array}{lr}\text { Bonds payable, } 10 \% \text { (issued } 1998 \text {, due } 2022 \text { ) } & \$ 1,200,000 \\\text { Preferred } 5 \% \text { stock, } \$ 100 \text { par (no change during year) } & 350,000 \\\text { Common stock, } \$ 50 \text { par (no change during year) } & 2,100,000 \\\text { Income before income tax for year } & 3100,000\\\text { Income tax for year } & 72,000 \\\text { Common dividends paid } & 58,000 \\\text { Preferred dividends paid } & 16,300\end{array}$ ?
Based on the data presented above, what is the times interest earned?

• A) 2.6
• B) 0.7
• C) 3.6
• D) 2.9

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Definitions:

Long-Term Contracts

Agreements that extend beyond one year, often relating to construction, service, or lease contracts.

Losses

Financial transactions or events that result in a decrease in assets, increase in liabilities, or both, leading to a reduction in equity or net assets.

Sale

A transaction between two parties where the buyer receives goods, services, or assets in exchange for money.

Revenue Recognition

Refers to the criteria or guidelines used by a company to recognize revenue in its financial statements, ensuring revenue is recorded when earned.