Balance Sheet and Income Statement Data Indicate the Following Based on the Data Presented, What Is the Times Interest

question 23

Multiple Choice

Balance sheet and income statement data indicate the following:? $$\begin{array} { l r } \text { Bonds payable, } 10 \% \text { (due in two years) } & \$ 1,000,000 \\\text { Preferred } 5 \% \text { stock, } \$ 100 \text { par (no change during year) } & 300,000 \\\text { Common stock, } \$ 50 \text { par (no change during year) } & 2,000,000 \\\text { Income before income tax for year } & 550,000 \\\text { Income tax for year } & 80,000 \\\text { Common dividends paid } & 50,000 \\\text { Preferred dividends paid } & 15,000\end{array}$$ Based on the data presented, what is the times interest earned ratio? (Round to one decimal point.)

• A) 1.5
• B) 6.4
• C) 6.5
• D) 5.5

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Definitions:

Posting

The process of transferring journal entries to their respective accounts in the ledger, facilitating the organization and tracking of financial data.

Financial Statements

Formal reports of the financial activities and condition of a business, individual, or other entity.

Accrued Expense

Expenses that have been incurred but not yet paid or documented in the financial statements.

Electric Bill

A statement that specifies the amount of money charged for the consumption of electricity over a specific period.