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hard accounting question?

Balance sheet and income statement data indicate the following:

Bonds payable, 6% (issued 2000, due 2020) $1,200,000

Preferred 8% stock, $100 par

(no change during the year) 200,000

Common stock, $50 par

(no change during the year) 1,000,000

Income before income tax for year 340,000

Income tax for year 80,000

Common dividends paid 60,000

Preferred dividends paid 16,000

Based on the data presented above, what is the number of times bond interest charges were earned (round to two decimal places)?

a. 5.72

b. 6.83

c. 4.72

d. 4.83

please help me out...i am stuck

3 Answers

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  • Coco
    Lv 7
    8 years ago
    Favorite Answer

    a. 5.72

    $1,200,000 x 6% = $72,000 Interest Expense on Bonds Payable

    Number of Times Interest Earned = (Income before interest + tax) / Interest Expense

    (340,000 + 72,000) / 72,000 = 5.72

  • ?
    Lv 4
    5 years ago

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  • 6 years ago

    Balance sheet and income statement data indicate the following:

    Bonds payable, 12% (issued 1998, due 2022)

    $1,000,000

    Preferred 5% stock, $100 par (no change during year)

    300,000

    Common stock, $50 par (no change during year)

    2,000,000

    Income before income tax for year

    300,000

    Income tax for year

    80,000

    Common dividends paid

    50,000

    Preferred dividends paid

    15,000

    Based on the data presented above, what is the number of times interest charges were earned (rounded to one decimal place)?

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