Net Sales 400,000 Cost of Goods Sold 240,000 Gross Profit 160,000 Expenses: Oper

Question

Net Sales                   400,000 Cost of Goods Sold                   240,000 Gross Profit                   160,000 Expenses:       Operating Expense                       42,000       Interest Expense                       18,000            Total Expenses                     60,000 Income before Income Taxes                   100,000 Income Tax expense                     30,000 Net Income                     70,000 1. With the giver Balance sheet Compute for Times Interest Earned Net Sales                   400,000 Cost of Goods Sold                   240,000 Gross Profit                   160,000 Expenses:       Operating Expense                       42,000       Interest Expense                       18,000            Total Expenses                     60,000 Income before Income Taxes                   100,000 Income Tax expense                     30,000 Net Income                     70,000

Explanation / Answer

Earnings before interest and taxes=Gross profit-Operating expenses

=(160,000-42000)=$118000

Hence TIE=Earnings before interest and taxes/interest expense

(118,000/18000)

which is equal to

=6.56(Approx).

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