Question

Times interest earned Berry Company reported the following on the company's income statement in two recent...

Times interest earned

Berry Company reported the following on the company's income statement in two recent years:

    Current Year     Prior Year
Interest expense $293,000 $322,300
Income before income tax expense 3,545,300 4,189,900

a. Determine the number of times interest charges were earned for current Year and prior Year. Round to one decimal place.

Current Year
Prior Year

b. Is the number of times interest charges are earned improving or declining?

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Homework Answers

Answer #1

Answer a

Current Year 13.1
Prior Year 14.0

Calculations:

Particulars Current Year Prior Year
A EBIT $   3,838,300 $ 4,512,200
B Interest $      293,000 $    322,300
A/B Times interest earned ratio                 13.1               14.0

Note:

Particulars Current Year Prior Year
EBIT =$3,545,300+$293,000 =$4,189,900+$322,300

Answer b

Declining

In case of any doubt, please comment.

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