The Times Interest Earned Ratio of McHugh Company Is 4

question 55

Multiple Choice

The times interest earned ratio of McHugh Company is 4.5 times.The interest expense for the year was $20,000,and the company's tax rate is 40%.The company's net income is:

• A) $22,000.
• B) $42,000.
• C) $54,000.
• D) $66,000.

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Definitions:

Carrying Value

The book value of an asset or liability on a company's balance sheet, calculated as its original cost minus accumulated depreciation or amortization.

Bonds

A fixed income instrument that represents a loan made by an investor to a borrower, typically corporate or governmental.

Interest

The charge for the privilege of borrowing money, typically expressed as an annual percentage of the principal.

Mortgage Note Payable

A mortgage note payable is a legal agreement where the borrower promises to repay a debt used to purchase real estate, secured by the property itself.