Question
Ratio of Liabilities to Stockholders' Equity and Times Interest Earned The following data were taken from the financial statements of Hunter Inc. for December 31
Ratio of Liabilities to Stockholders' Equity and Times Interest Earned
The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years:
Current Year | Prior Year | |||
Accounts payable | $314,000 | $276,000 | ||
Current maturities of serial bonds payable | 400,000 | 400,000 | ||
Serial bonds payable, 10% | 1,980,000 | 2,380,000 | ||
Common stock, $1 par value | 90,000 | 120,000 | ||
Paid-in capital in excess of par | 990,000 | 990,000 | ||
Retained earnings | 3,410,000 | 2,710,000 |
The income before income tax expense was $880,600 and $770,500 for the current and prior years, respectively.
a. Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place.
Current year | fill in the blank 1 |
Prior year | fill in the blank 2 |
b. Determine the times interest earned ratio for both years. Round to one decimal place.
Current year | fill in the blank 3 |
Prior year | fill in the blank 4 |
c. The ratio of liabilities to stockholders' equity have
improveddeteriorated
and the times interest earned ratio has
improveddeteriorated
from the previous year. These results are the combined result of a
largersmaller
income before income taxes and
largerlower
interest expense in the current year compared to the previous year.
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