Stone Corporation has 25 employees and incurs total wages and salaries expense of $1,000,000 per year. The following table shows various payroll amounts as a percentage of this annual wage and salaries expense:

Workers compensation insurance	5%
Social security and Medicare (employees' share and Employer's share combined)	15.3%
Pension and other postretirement costs expense (paid by employer)	5%
Personal income taxes withheld	10%
Unemployment taxes expense	2%

In addition, Stone provides group health insurance for its entire workforce. The cost of this insurance is $400 per month for each employee.

19

Required information

Employees' annual "take-home-pay," totals approximately:

$900,000.

$880,000.

$583,500.

$823,500.

Q..Sanford Corporation borrowed $240,000 by issuing a 17%, six-month note payable, all due at the maturity date. After one month, the company's total liability for this loan amounts to:

$240,000.

$241,700.

$243,400.

$246,800.

Q1. On September 1, 2015, Able Company purchased a building from Regal Corporation by paying $280,000 cash and issuing a one-year note payable for the balance of the purchase price. Interest on the note is stated at an annual rate of 8% and is paid at maturity. In its December 31, 2015, balance sheet, Able correctly presented the note and interest payable as follows:

Interest payable	$6,800
Notes payable, 8%, due September 1, 2016	$255,000

17.

Required information

What is the amount of the interest expense Able will recognize on this note in 2016?

$20,400.

$6,800.

$13,600.

$11,900.

2.The interest coverage ratio is computed by dividing:

Net income by interest expense.

Operating income by interest expense.

Interest expense by net income.

Interest expense by operating income.