Balance Sheet and Income Statement Data Indicate the Following ​ (A) for Each Company, What Is the Times Interest

question 130

Essay

Balance sheet and income statement data indicate the following: $\begin{array}{lrr}&\text { Company A } & \text { Company B } \\\text { Bonds payable, } 8 \%, 24 \text {-year bonds } & \$ 1,200,000 & \$ 900,000 \\\text { Income before income tax for year } & 495,000 & 130,000 \\\text { Income tax for year } & 75,000 & 12,000 \\\text { Interest payable } & 50,000 & 0 \\\text { Interest receivable } & 21,000 & 28,000\end{array}$ ​ (a) For each company, what is the times interest earned ratio? (Round to one decimal place)
(b) Which company gives potential creditors more protection?

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Definitions:

Voidable

A legal term describing a transaction or action that is valid until it is annulled or voided by one of the parties involved.

Enforceable

Capable of being imposed or complied with, typically referring to legal agreements or orders that can be upheld by law.

Secretary of State

A senior official in the state government responsible for managing governmental operations, often including the overseeing of elections and maintaining public records.

UCC

The Uniform Commercial Code, a comprehensive set of laws governing commercial transactions in the United States.