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Emmitt Company Balance Sheet Assets: Cash and marketable securities $400,000 Accounts receivable 1,415,000 Inventories 1,847,500 Prepaid expenses 24,000 Total current assets 3,686,500 Fixed assets 2,800,000

Emmitt Company
Balance Sheet

Assets:
Cash and marketable securities $400,000
Accounts receivable 1,415,000
Inventories 1,847,500
Prepaid expenses 24,000
Total current assets 3,686,500
Fixed assets 2,800,000
Less: accum. depr. (1,087,500)
Net fixed assets 1,712,500
Total assets $5,399,000
Liabilities:
Accounts payable $600,000
Notes payable 875,000

Accrued taxes 92,000
Total current liabilities $1,567,000
Long-term debt 900,000
Common Stock (100,000 shares) 700,000
Retained Earnings 2,232,000
Total liabilities and owner's equity $5,399,000
Net sales (all credit) $6,375,000
Less: Cost of goods sold (4,375,000)
Selling and administrative expense (1,000,000)
Depreciation expense (135,000)
Interest expense (100,000)
Earnings before taxes $765,000
Income taxes (306,000)
Net income $459,000

Based on the information in Table 4-2, the times interest earned ratio is

  • A. 8.65.
  • B. 4.88.
  • C. 5.25.
  • D. 11.48.

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