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Hsu Company reported the following on its income statement: Income before income taxes $420,000 Income tax expense 120,000 Net income $300,000 Interest expense was $80,000. Hsu Company's times interest earned is a.6.25 times b.5 times c.5.25 times d.8 times

Respuesta :

ayokenny2001

Answer:

a. 6.25 times

Explanation:

Times interest earned ratio = Earnings before income taxes / Total interest expense

Earnings before income taxes = Income before taxes + interest expense

Earnings before income taxes = $420,000 + $80,000

= $500,000

Total interest expense = $80,000

Therefore,

Times interest earned ratio = $500,000 / $80,000

= 6.25 times

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