Question

McDaniel and Associates reported the following amounts on its 2018 income​ statement: Year Ended December 31, 2018Net income$83,250Income tax expense29,950Interest expense 5,000 What was McDaniel​'s ​times-interest-earned ratio for 2018​?

Answer 1

Answer:

Times-interest-earned ratio will be 23.64

Explanation:

We have given net income = $83250

Income tax expense = $29950

Interest expense = $5000

Earning before interest and tax = Net Income + Income tax expense + Interest expense

Earning before interest and tax = $83250+$29950+$5000 = $118200

Time interest earned ratio is given by

$=\frac{Earning\  before\  interest \ and \ tax}{interest\ expense}=\frac{118200}{5000}=23.64$

times-interest-earned ratio will be 23.64