Garnet Company reported the following on its income statement: ? $\begin{array}{lr}
\text { Income before income taxes } & \$ 450,000 \
\text { Income tax expense } & 52,000 \
\text { Net income }&\$398,000
\end{array}$ ?
An analysis of the income statement revealed that interest expense was $50,000.Garnet Company's times interest earned are earned was:

Question

Quizplus · Accepted Answer

The times interest earned ratio is calculated as (Income Before Interest and Taxes) / Interest Expense. Given that Income Before Taxes is $450,000 and Interest Expense is $50,000, we first need to add back the Interest Expense to the Income Before Taxes to get Income Before Interest and Taxes (EBIT). EBIT = $450,000 + $50,000 = $500,000. Then, Times Interest Earned = $500,000 / $50,000 = 10 times.

Garnet Company Reported the Following on Its Income Statement ? an Analysis of the Income Statement Revealed That Interest

Garnet Company Reported the Following on Its Income Statement ?
an Analysis of the Income Statement Revealed That Interest