$$\begin{array}{l}
\text { Tate Company reported the following on its income statement: }\
\begin{array} { l r }
\text { Income before income taxes } & \$ 500,000 \
\text { Income tax expense } & \underline{150,000} \
\text { Net income } & \underline{\underline{\$ 350,000}}
\end{array}
\end{array}$$ An analysis of the income statement revealed that interest expense was $100,000.Tate Company's times interest earned was

Question

$$\begin{array}{l}
\text { Tate Company reported the following on its income statement: }\
\begin{array} { l r } 
\text { Income before income taxes } & \$ 500,000 \
\text { Income tax expense } & \underline{150,000} \
\text { Net income } & \underline{\underline{\$ 350,000}}
\end{array}
\end{array}$$ An analysis of the income statement revealed that interest expense was $100,000.Tate 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 is ($500,000 + $100,000) / $100,000 = 6 times.

An Analysis of the Income Statement Revealed That Interest Expense