1- On January 1, Year One, Lori Inc. signed a five-year finance lease for the use of an asset. Payments are $5,000 on each January 1, beginning with Year One. The implicit rate is 6 per- cent which is known by Lori Inc. The present value of an annuity due of $1 at 6 percent for five periods is $4.46511.

1. Determine Loris interest expense for Year One.

2. Assume Loris reported earnings for Year One before interest and taxes are $18,224. Determine Loris time's interest earned.

3. Assume that on January 1, Year One, before signing this lease agreement, Lori reported assets of $500,000 and liabilities of $220,000. What impact did signing this contract have on the companys debt-to-equity ratio?

2- In several past chapters, we met Heather Miller, who started her own business, Sew Cool. The following are the financial statements for December.

Chapter 15 In a Set of Financial Statements, What Information Is Conveyed about Other Noncurrent Liabilities? 635 $ 4,000 2,000 Sew Cool Income Statement as of December 31, 20x8 Revenue Cost of Goods Gross Profit Other Expenses Earnings before Interest and Tax Interest Expense Earnings before Tax Tax Expense Net Income 2,000 1,665 335 30 305 107 $ 198 Sew Cool Statement of Retained Earnings as of December 31, 20X8 Retained Earnings, December 1, 20x8 Net Income Dividends Retained Earnings, December 31, 20x8 500 198 (158) 540 $ Assets Sew Cool Balance Sheet December 31, 20X8 Liabilities Current 940 Accounts Payable 500 Income Tax Payable (20) Total Current Liabilities Current $ S 900 Cash Accounts Receivable 120 1,020 Less Allowance for Doubtful Accounts Net Accounts Receivable Inventory Total Current Assets 480 700 2,120 Noncurrent Noncurrent Equipment 1,000 Notes Payable 1.060 500 Owners' Equity Capital Stock Retained Earnings Total Owners' Equity ' 540 1,040 2020 Boston Academic Publishing, Inc., d.b.a FlatWorld. All rights reserved. 636 Financial Accounting Sew Cool Balance Sheet December 31, 20x8 3,120 Total Liabilities & Owners' Equity Total Assets $ $ 3,120 Based on the financial statements determine the following: a. Debt-to-equity ratio. b. Times interest earned. Chapter 15 In a Set of Financial Statements, What Information Is Conveyed about Other Noncurrent Liabilities? 635 $ 4,000 2,000 Sew Cool Income Statement as of December 31, 20x8 Revenue Cost of Goods Gross Profit Other Expenses Earnings before Interest and Tax Interest Expense Earnings before Tax Tax Expense Net Income 2,000 1,665 335 30 305 107 $ 198 Sew Cool Statement of Retained Earnings as of December 31, 20X8 Retained Earnings, December 1, 20x8 Net Income Dividends Retained Earnings, December 31, 20x8 500 198 (158) 540 $ Assets Sew Cool Balance Sheet December 31, 20X8 Liabilities Current 940 Accounts Payable 500 Income Tax Payable (20) Total Current Liabilities Current $ S 900 Cash Accounts Receivable 120 1,020 Less Allowance for Doubtful Accounts Net Accounts Receivable Inventory Total Current Assets 480 700 2,120 Noncurrent Noncurrent Equipment 1,000 Notes Payable 1.060 500 Owners' Equity Capital Stock Retained Earnings Total Owners' Equity ' 540 1,040 2020 Boston Academic Publishing, Inc., d.b.a FlatWorld. All rights reserved. 636 Financial Accounting Sew Cool Balance Sheet December 31, 20x8 3,120 Total Liabilities & Owners' Equity Total Assets $ $ 3,120 Based on the financial statements determine the following: a. Debt-to-equity ratio. b. Times interest earned