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According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.6 percent between January
According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.6 percent between January and December 2018. Let's see whether these changes are reflected in the income statement of Computer Tycoon Incorporated for the year ended December 31, 2018. Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income 2018 $ 100,000 60,000 40,000 36,000 500 3,500 1,000 $ 2,500 2017 $ 120,000 71,500 48,500 37,000 475 11,025 5,000 $ 6,025 Required: 1. Compute the times interest earned ratios for 2018 and 2017. 2. Does Computer Tycoon generate sufficient net income in both years (before taxes and interest) to cover the cost of debt financing
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