Balance sheet and income statement data indicate the following: Based on the data presented above, what is the number of times bond interest charges were earned round to one decimal point?
A)1.5
B)6.4
C)6.5
D)5.5

Question

Balance sheet and income statement data indicate the following:  Based on the data presented above, what is the number of times bond interest charges were earned round to one decimal point?
A)1.5 
B)6.4 
C)6.5 
D)5.5

Quizplus · Accepted Answer

We can calculate the times the bond interest charges were earned by dividing earnings before interest and taxes (EBIT) by the bond interest charges.

Times bond interest charges were earned = EBIT / Bond interest charges

From the income statement, we get EBIT = $89,500 and from the balance sheet, we get bond interest charges = $13,700.

Times bond interest charges were earned = $89,500 / $13,700 = 6.54 (rounded to one decimal place)

Therefore, the number of times bond interest charges were earned is 6.5. Hence, the correct choice is C.

Balance Sheet and Income Statement Data Indicate the Following