The following information is available from the balance sheets at the ends of the two most recent years and the income statement for the most recent year of Impact Company:

Other Information
a. Short-term notes payable represents a 12-month loan that matured in November 2010. Interest of 12% was paid at maturity.
b. One million dollars of serial bonds had been issued ten years earlier. The first series of $200,000 matured at the end of 2010, with interest of 8% payable annually.
c. Cash flow from operations was $185,000 in 2010. The amounts of interest and taxes paid during 2010 were $89,000 and $96,000, respectively.
Required
1. Compute the following for Impact Company:
a. The debt-to-equity ratio at December 31, 2010, and December 31, 2009
b. The times interest earned ratio for 2010
c. The debt service coverage ratio for 2010
2. Comment on Impact€™s solvency at the end of 2010. Do the times interest earned ratio and the debt service coverage ratio differ in their indication of Impact€™s ability to pay its debts?Explain.

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December 31 2010 2009 Accounts payable Accrued liabilities Taxes payable Short-term notes payable Bonds payable due within next year $ 65,000 25,000 60,000 0 200,000 S 350,000 S 600,000 $1,000,000 650,000 $1,650,000 $ 50,000 35,000 45,000 75,000 200,000 S 405,000 $ 800,000 $1,000,000 500,000 $1.500,000 $2,705,000 Total current liabilities Bonds payable Common stock, $10 par Retained earnings Total stockholders' equity Total liabilities and stockholders' equity 2010 $1,600,000 Sales revenue Cost of goods sold Selling and administrative expense Interest expense Income tax expense Gross profit Operating income Income before tax Net income S650,000 300,000 S 350,000 89,000 S 261,000 111,000 $ 150.000