Ratio of Liabilities to Stockholders' Equity and Times Interest Earned The following data were taken from the...

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Accounting

Ratio of Liabilities to Stockholders' Equity and Times InterestEarned
The following data were taken from the financial statements ofHunter Inc. for December 31 of two recent years:
Current Year Previous Year
Accounts payable $552,000 $162,000
Current maturities of serial bonds payable 370,000 370,000
Serial bonds payable, 10% 1,520,000 1,890,000
Common stock, $1 par value 80,000 100,000
Paid-in capital in excess of par 900,000 900,000
Retained earnings 3,090,000 2,460,000
The income before income tax was $529,200 and $463,100 for thecurrent and previous years, respectively.
a. Determine the ratio of liabilities tostockholders' equity at the end of each year. Round to one decimalplace.
Current year
Previous year
b. Determine the times interest earned ratiofor both years. Round to one decimal place.
Current year
Previous year
c. The ratio of liabilities to stockholders'equity has and the times interest earned ratio has from theprevious year. These results are the combined result of a incomebefore income taxes and interest expense in the current yearcompared to the previous year.

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3.6 Ratings (298 Votes)

		current year	previous year
Total liabilities		552000+370000+1520000=2442000	162000+370000+1890000=2422000
Total equity		80000+900000+3090000=4070000	100000+900000+2460000=3460000
a)ratio of liabilities to stockholders' equity	Total liabilities /total equity	2442000/4070000 .60	2422000/3460000 .70
b)times interest earned ratio	(Income before tax+interest)/Interest	[529200+189000/]/189000 3.8	[463100+226000]/226000 3

**serial bond outstanding at beginning of previous year= Outstanding at end (non current)

= (1890000+370000)

= 2260000

Interest = 2260000*10%= 226000

****Interest for current year = 1890000*10%=189000

c)The ratio of liabilities to stockholders' equity has improved and the times interest earned ratio has improved from the previous year.These results are the combined result of a Higher income before income taxes and lower interest expense in the current year compared to the previous year.

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Ratio of Liabilities to Stockholders' Equity and Times InterestEarnedThe following data were taken from the financial statements ofHunter Inc. for December 31 of two recent years:Current YearPrevious YearAccounts payable$552,000$162,000Current maturities of serial bonds payable370,000370,000Serial bonds payable, 10%1,520,0001,890,000Common stock, $1 par value80,000100,000Paid-in capital in excess of par900,000900,000Retained earnings3,090,0002,460,000The income before income tax was $529,200 and $463,100 for thecurrent and previous years, respectively.a. Determine the ratio of liabilities tostockholders' equity at the end of each year. Round to one decimalplace.Current yearPrevious yearb. Determine the times interest earned ratiofor both years. Round to one decimal place.Current yearPrevious yearc. The ratio of liabilities to stockholders'equity has and the times interest earned ratio has from theprevious year. These results are the combined result of a incomebefore income taxes and interest expense in the current yearcompared to the previous year.

	Current Year	Previous Year
Accounts payable	$552,000	$162,000
Current maturities of serial bonds payable	370,000	370,000
Serial bonds payable, 10%	1,520,000	1,890,000
Common stock, $1 par value	80,000	100,000
Paid-in capital in excess of par	900,000	900,000
Retained earnings	3,090,000	2,460,000