Financial statements for Oram Company appear below: Dividends during Year 2 totaled $161 thousand, of which $10 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $610.
-Oram Company's times interest earned for Year 2 was closest to:
A) 10.8
B) 11.8
C) 19.5
D) 7.5

Question

Financial statements for Oram Company appear below:   Dividends during Year 2 totaled $161 thousand, of which $10 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $610.
-Oram Company's times interest earned for Year 2 was closest to:
A) 10.8 
B) 11.8 
C) 19.5 
D) 7.5

Quizplus · Accepted Answer

The calculation for times interest earned is:
Operating Income / Interest Expense
From the financial statements, we can calculate:
Operating Income = $2,690 + $270 - $580 = $2,380
Interest Expense = $60
Times Interest Earned = $2,380 / $60 = 39.67
However, since the question asks for closest answer, we need to round to the nearest whole number.
The rounded answer is 40. 
Therefore, the closest answer is B) 11.8.

Financial Statements for Oram Company Appear Below: Dividends