MEGAFRAME COMPUTER COMPANY
Balarce Sheet
as of Decermber 31 MEGAFRAME COMPUTER COMPANY
Income Statement
for the Year Ended Decernber

question 46

Multiple Choice

MEGAFRAME COMPUTER COMPANY
Balarce Sheet
As of Decermber 31
$\begin{array}{lr}\text { ASSETS } \\\text { Cash } & \$ 50,000 \\\text { Accounts receivable } & 70,000 \\\text { Inventory } & 110,000 \\\text { Net plant and equipment } & 220,000\\\text { Total assets }&\$450,000\\\\\text { LIABIITES AND STOCKHOLDERS' EQUTTY }\\\text { Accounts payable } & \$ 0,000 \\\text { Accrued expenses } & 50,000 \\\text { Long-term debt } & 130,000 \\\text { Common stock } & 70,000 \\\text { Paid-in capital } & 40,000 \\\text { Retained earnings } & 90,000\\\text { Total liabilities and stockholders' equity }&\$450,000\end{array}$
MEGAFRAME COMPUTER COMPANY
Income Statement
For the year ended Decernber 31
$\begin{array}{ll}\text {Sales (all on credit) }&\$875,000 \\\text { Cost of goods sold}&600,000 \\\text {Gross profit }& \$275,000\\\text { Sales and administrative expenses}&30,000 \\\text {Depreciation }&55,000 \\\text { Operating profit}&\$190,000 \\\text {Interest expense }&25,000 \\\text {Profit before taxes }&\$165,000 \\\text { Taxes \( (30 \%) \) }&49,500 \\\text { Net income}& \$115,500\\\end{array}$

Refer to the tables above. Times interest earned for Megaframe Computer is ________.

• A) 3.8x
• B) 4.6x
• C) 11x
• D) 7.6x

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