According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipmentfell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statement ofGonzalez Industries for the year ended December 31, 2018.Sales RevenueCost of Goods SoldGross ProfitSelling, General, and Administrative ExpensesInterest ExpenseIncome before Income Tax ExpenseIncome Tax ExpenseNet IncomeRequired 1 Required 22018$ 117,00068,50048,50037,700Year67010, 1302,500$ 7,630201720182017$ 145,500Required:1. Compute the times interest earned ratios for 2018 and 2017.2. Does Gonzalez generate sufficient net income in both years (before taxes and interest) to cover the cost of debt financing?78,30067,20040,400Complete this question by entering your answers in the tabs below.56026,2406,700$ 19,540Compute the times interest earned ratios for 2018 and 2017. (Round your answers to 1 decimal place.)Times InterestEarned

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Description: According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipmentfell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statem

In order to determine the times interest earned ratio, the earning before interest and taxes are…

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According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statement of Gonzalez Industries for the year ended December 31, 2018. Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income 2018 $ 117,000 68,500 48,500 37,700 670 10,130 2,500 $ 7,630 2017 $ 145,500 78,300 67,200 40,400 560 26,240 6,700 $ 19,540 Required: 1. Compute the times interest earned ratios for 2018 and 2017. 2. Does Gonzalez generate sufficient net income in both years (before taxes and interest) to cover the cost of debt financing?

According to the producer price index database maintained by the Bureau of Labor Statistics, the average cost of computer equipment fell 3.8 percent between January and December 2018. Let's see whether these changes are reflected in the income statement of Gonzalez Industries for the year ended December 31, 2018. Sales Revenue Cost of Goods Sold Gross Profit Selling, General, and Administrative Expenses Interest Expense Income before Income Tax Expense Income Tax Expense Net Income 2018 $ 117,000 68,500 48,500 37,700 670 10,130 2,500 $ 7,630 2017 $ 145,500 78,300 67,200 40,400 560 26,240 6,700 $ 19,540 Required: 1. Compute the times interest earned ratios for 2018 and 2017. 2. Does Gonzalez generate sufficient net income in both years (before taxes and interest) to cover the cost of debt financing?

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter16: Financial Statement Analysis

Section: Chapter Questions

Problem 3E

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