Question

Selected Income Statement Data - for the year ending December 31, 2017: Net sales $4,885,340 Cost of goods sold (2,942,353 ) Selling expenses (884,685 ) Operating income 1,058,302 Interest expense (55,240 ) Earnings before income taxes 1,003,062 Income tax expense (401,225 ) Net income $ 601,837 Selected Statement of Cash Flow Data - for the year ending December 31, 2017: Cash flows from operations $1,456,084 Capital expenditures $745,862 Wilmington Corporation's times interest earned ratio in 2017 was: A. 20.57 B. 19.16 C. 10.89 D. 18.15

Answer 1

Option (b) is correct.

Step-by-step explanation:

Given that,

Net sales = $4,885,340

Cost of goods sold = (2,942,353 )

Selling expenses = (884,685 )

Operating income = $1,058,302

Interest expense = $(55,240 )

Earnings before income taxes = $1,003,062

Income tax expense = $(401,225 )

Net income = $ 601,837

EBIT = Net income + Income tax expense + Interest expense

= $1,003,062 + $401,225 + $55,240

= $1,058,302

Times interest earned ratio in 2017:

= EBIT ÷ Interest expense

= $1,058,302 ÷ $55,240

= 19.1582 or 19.16