Auto Industries Company Reported the Following on Its Income Statement

question 41

Multiple Choice

Auto Industries Company reported the following on its income statement: $\begin{array}{lr}\text { Income before income taxes } & \$ 420,000 \\\text { Income tax expense } & \underline{120,000} \\\text { Net income } & \$ 300,000\end{array}$ ? If the income statement also shows interest expense equal to $80,000, what is the company's times interest earned ratio?

• A) 5 times
• B) 8 times
• C) 5.25 times
• D) 6.25 times

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Definitions:

Fixation

In psychoanalytic theory, an obsessive interest or attachment to a developmental phase or aspect of personal interaction.

Free Association

A psychoanalytic technique in which a patient says whatever comes to mind without censorship as a way to explore unconscious thoughts and feelings.

Collective Unconscious

coined by Carl Jung, refers to the part of the unconscious mind that is derived from ancestral memory and experience, common to all humankind.

Projection

A defensive mechanism where individuals attribute their own unacceptable thoughts, feelings, or motives to another person.