Use the information in E13-3 to complete the following requirement.

Required:

Compute the times interest earned ratios for 2017 and 2016. In your opinion, does Computer Tycoon generate sufficient net income (before taxes and interest) to cover the cost of debt financing?

Transcribed Image Text:

2017 2016 $98,913 $121,761 Sales Revenues Cost of Goods Sold 59,249 71,583 Gross Profit 39,664 50,178 36,934 Selling, General, and Administrative Expenses 36,943 Interest Expense 565 474 Income Before Income Tax Expense 2,156 12,770 1,024 Income Tax Expense 5,540 $ 1,132 $ 7,230 Net Income