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:

2012
Sales revenue.............................................$1,600,000
Cost of goods sold...........................................950,000
Gross profit.................................................$ 650,000
Selling and administrative expense........................300,000
Operating income..........................................$ 350,000
Interest expense................................................89,000
Income before tax..........................................$ 261,000
Income tax expense...........................................111,000
Net income..................................................$ 150,000
Other Information
a. Short-term notes payable represents a 12-month loan that matured in November 2012. 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 2012, with interest of 8% payable annually.
c. Cash flow from operations was $185,000 in 2012. The amounts of interest and taxes paid during 2012 were $89,000 and $96,000, respectively.
Required
1. Compute the following for Impact Company:
a. The debt-to-equity ratio at December 31, 2012, and December 31, 2011
b. The times interest earned ratio for 2012
c. The debt service coverage ratio for 2012
2. Comment on Impact's solvency at the end of 2012. 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 2012 2011 Accounts payable Accrued liabilities Taxes payable Short-term notes payable Bonds payable due within next year S 65,000 50,000 35,000 45,000 75,000 200,000 S 350,000 405,000 S 600,000 800,000 $1,000,000 $1,000,000 500,000 $1,650,000 $1,500,000 $2,600,000 $2,705,000 25,000 60,000 200,000 Total current liabilitie:s Bonds payable Common stock, $10 par Retained earnings 650,000 Total stockholders' equity Total liabilities and stockholders' equity