Question
E13-5 (Static) Computing a Commonly Used Solvency Ratio [LO 13-4, LO 13-5] According to the producer price index database maintained by the Bureau of
E13-5 (Static) Computing a Commonly Used Solvency Ratio [LO 13-4, LO 13-5] According to the producer price index database maintained by the Bureau of Labor Statistics, the averag fell 3.6 percent between January and December 2018. Let's see whether these changes are reflected in Computer Tycoon Incorporated for the year ended December 31, 2018. 2017 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 Required: 2018 $ 100,000 60,000 $ 120,000 71,500 40,000 48,500 36,000 37,000 500 475 3,500 11,025 1,000 5,000 $ 2,500 $ 6,025 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
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