Question

Berry Company reported the following on the company's income statement in two recent years: Current Year Prior Year Interest expense $320,000 $300,000 Income before income tax expense 3,200,000 3,600,000

Determine the number of times interest charges are earned current year and the prior year.

Answer 1

Current year=11 times

Prior year=13 times

Step-by-step explanation:

Calculation for Determining the number of times interest charges are earned current year and the prior year

Using this formula

Times interest earned ratio= Income before Tax expense + Interest expense/Interest expense

Calculation for CURRENT YEAR

Current year =($3,200,000+$320,000)/$320,000

Current year =$3,520,000/$320,000

Current year=11 times

Calculation for PRIOR YEAR

Prior year=($3,600,000+$300,000)/$300,000

Prior year=$3,900,000/$300,000

Prior year=13 times

Therefore the number of times interest charges that are earned in current year will be 11 times and prior year will be 13 times .