Lake Company reported the following on its income statement: $$\begin{array} { l r }
\text { Income before income taxes } & \$ 600,000 \
\text { Income tax expense } & 150,000 \
\text { Net income } & \$ 450,000
\end{array}$$ An analysis of the income statement revealed that interest expense was $60,000. Lake Company's times interest earned was

Question

Lake Company reported the following on its income statement: $$\begin{array} { l r } 
\text { Income before income taxes } & \$ 600,000 \
\text { Income tax expense } & 150,000 \
\text { Net income } & \$ 450,000
\end{array}$$ An analysis of the income statement revealed that interest expense was $60,000. Lake Company's times interest earned was

Quizplus · Accepted Answer

The times interest earned ratio is calculated as (Income before income taxes + Interest expense) / Interest expense. Here, it's ($600,000 + $60,000) / $60,000 = $660,000 / $60,000 = 11 times.

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