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Accounts payable 390,000 Ratio of Liabilities to Stockholders' Equity and Number of Times Interest Earned The following data were taken from the financial statements of

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Accounts payable 390,000 Ratio of Liabilities to Stockholders' Equity and Number of Times Interest Earned The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years: Current Year Previous Year $592,000 $177,000 Current maturities of serial bonds payable 390,000 Serial bonds payable, 10% 1.640.000 2,030,000 Common stock, $1 par value Paid-in capital in excess of par 960,000 Retained earnings 3,320,000 2,630,000 The income before income tax was $751,100 and $657,200 for the current and previous years, respectively. a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place. 90.000 120,000 960,000 Current year Previous year b. Determine the times interest earned ratio for both years. Round to one decimal place. Current year Previous year c. The ratio of liabilities to stockholders' equity has improved and the number of times bond interest charges were earned has improved from the previous year. These results are the combined result of a larger v income before income taxes and lower v interest expense in the current year compared to the previous year. a. Divide total liabilities by total stockholders'equity. b. Divide the sum of income before income tax plus interest expense by interest expense. C. Consider the relationship of the accounts involved. Learning Objective 4

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