Chapter 11: 15RQ (page 604)
How is the times-interest-earned ratio calculated, and what does it evaluate?
Short Answer
The times-interest-earned ratio is the ratio between earnings before interest & tax (EBIT) and interest expense.
Chapter 11: 15RQ (page 604)
How is the times-interest-earned ratio calculated, and what does it evaluate?
The times-interest-earned ratio is the ratio between earnings before interest & tax (EBIT) and interest expense.
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Get started for freeThe income statement for California Communications follows. Assume California Communications signed a 3-month, 9%, $3,000 note on June 1, 2018, and that this was the only note payable for the company.
Requirements
1. Fill in the missing information for California’s year ended July 31, 2018, income statement. Round to the nearest dollar.
2. Compute the times-interest-earned ratio for the company. Round to two decimals.
On January 1, Irving Company purchased equipment of \(280,000 with a long-term note payable. The debt is payable in annual installments of \)56,000 due on December 31 of each year. At the date of purchase, how will Irving Company report the note payable?
How do unearned revenues arise?
Curtis Company is facing a potential lawsuit. Curtis’s lawyers think that it is reasonably possible that it will lose the lawsuit. How should Curtis report this lawsuit?
What are the three main characteristics of liabilities?
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