Question
Sherwills statement of consolidated income is as follows: Net sales 658 other income 8 =666 Costs and expenses: Cost of products sold 418 Selling, general,
Sherwills statement of consolidated income is as follows:
Net sales 658 other income 8 =666
Costs and expenses:
Cost of products sold 418 Selling, general, and administrative expenses 196 Interest 16 =630
Income before income taxes and extraordinary charges 36 Income taxes 18 Income before extraordinary charge 18 Extraordinary chargelosses on tornado damage (net) 4 =Net income 14
Note: Depreciation expense totals $200; operating lease payments total $150; and preferred dividends total $50. Assume that one-third of operating lease payments is for interest. Required a. Compute the times interest earned. b. Compute the fixed charge coverage.
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