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:

Average Fixed Cost

The total fixed costs divided by the number of units produced, representing how fixed costs dilute with increased production.

Marginal Cost

Marginal cost is the increase or decrease in the total cost that arises when the quantity produced is incremented by one unit.

Average Variable Cost

The cost of production that varies with the output level, calculated by dividing the total variable costs by the number of units produced.

Average Product

is the output per unit of input, such as the quantity of goods produced per labor hour, and is used to measure productivity.