Farr Company reported the following on its income statement: $\begin{array}{lr}
\text { Income before income taxes } & \$ 600,000 \
\text { Income tax expense } & 150,000 \
\text { Net income } & \$450,000
\end{array}$ An analysis of the income statement revealed that interest expense was $50,000. Farr Company's times interest earned was

Question

Quizplus · Accepted Answer

The times interest earned ratio is calculated as (Income before income taxes + Interest expense) / Interest expense. Here, it is ($600,000 + $50,000) / $50,000 = 13 times.

Farr Company Reported the Following on Its Income Statement An Analysis of the Income Statement Revealed That Interest Expense