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Homework answers / question archive / Refer to the following selected financial information from Gomez Electronics
Refer to the following selected financial information from Gomez Electronics. Compute the company's times interest earned for Year 2 Net sales Cost of goods sold Interest expense Net income before tax Net income after tax Total assets Total liabilities Total equity Year 2 Year 1 $488,500 $428,250 278,300 252,120 11,700 12,700 69,250 54,680 48,050 41,900 321,100 300,000 171,400 169,300 149,700 130,700
On January 1 of the current year, Jimmy's Sandwich Company reported total stockholders' equity of $130,000. During the current year, total revenues were $110,000 while total expenses were $99,500. Also, during the current year the company paid $34,000 in dividends. No other changes in equity occurred during the year. The change in total equity during the year was.
Solution: Time interest earned = Earnings before interest and taxes / Interest Expense
= (Net income before tax + Interest expense) / Interest Expense
= ($ 69,250 + $ 11,700) / $ 11,700
= $80,950 / $11,700
= 6.92 times (rounded to 2 decimal places)
| Jimmy's Sandwich Company | ||
| 1-Jan | Beginning Stockholders' Equity | 130000 |
| 31-Dec | Add:Net income for the year(110000-99500) | 10500 |
| Less: Dividends paid | -34000 | |
| Ending Stockholders' Equity | 106500 | |
| so, | ||
| the change in total equity during the year= | ||
| Net revenues /income less dividends | ||
| ie.(110000-99500)-34000= | ||
| ie.10500-34000= | ||
| -23500 | ||
| (Answer) |
