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Fayer Corporation has provided the following financial data: Balance Sheet December 31, Year 2 and Year 1 Assets Year 2 Year 1 Current assets: Cash

Fayer Corporation has provided the following financial data:

Balance Sheet December 31, Year 2 and Year 1
Assets Year 2 Year 1
Current assets:
Cash $161,000 $180,000
Accounts receivable 110,000 130,000
Inventory 181,000 160,000
Prepaid expenses 57,000 70,000
Total current assets 509,000 540,000
Plant and equipment, net 1,044,000 960,000
Total assets $1,553,000 $1,500,000
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $188,000 $160,000
Accrued liabilities 57,000 60,000
Notes payable, short term 36,000 40,000
Total current liabilities 281,000 260,000
Bonds payable 200,000 200,000
Total liabilities 481,000 460,000
Stockholders' equity:
Common stock, $4 par value 200,000 200,000
Additional paid-in capital-common stock 80,000 80,000
Retained earnings 792,000 760,000
Total stockholders' equity 1,072,000 1,040,000
Total liabilities & stockholders' equity $1,553,000 $1,500,000

Income StatementYear 2 For the Year Ended December 31, Year 2
Sales (all on account) $1,220,000
Cost of goods sold 760,000
Gross margin 460,000
Operating expenses 389,846
Net operating income 70,154
Interest expense 14,000
Net income before taxes 56,154
Income taxes (35%) 19,654
Net income $36,500

Dividends on common stock during Year 2 totaled $4,500. The market price of common stock at the end of Year 2 was $10.88 per share. The company's times interest earned for Year 2 is closest to:

7.71

4.01

2.61

5.01

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