Farr Company reported the following on its income statement: $\begin{array}{lr}
\text { Income before income taxes } & \$ 400,000 \
\text { Income tax expense } & 100,000 \
\text { Net income } & \$ 300,000
\end{array}$

An analysis of the income statement revealed that interest expense was $100,000.Farr Company's times interest earned was

Question

Farr Company reported the following on its income statement: $\begin{array}{lr}
\text { Income before income taxes } & \$ 400,000 \
\text { Income tax expense } & 100,000 \
\text { Net income } & \$ 300,000
\end{array}$

An analysis of the income statement revealed that interest expense was $100,000.Farr Company's times interest earned was

Quizplus · Accepted Answer

Times interest earned is calculated as (Income before income taxes + Interest expense) / Interest expense. Here, it is ($400,000 + $100,000) / $100,000 = 5 times.

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