a.  Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place. Current year   Previous year   b.  Determine the times interest earned ratio for both years. Round to one decimal place. Current year   Previous year   c.  The ratio of liabilities to stockholders' equity has   and the times interest earned ratio has   from the previous year. These results are the combined result of a   income before income taxes and   interest expense in the current year compared to the previous year

FINANCIAL ACCOUNTING
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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Ratio of Liabilities to Stockholders' Equity and Times Interest Earned

The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years:

  Current Year Previous Year
Accounts payable $697,000   $182,000  
Current maturities of serial bonds payable 430,000   430,000  
Serial bonds payable, 10% 1,750,000   2,180,000  
Common stock, $1 par value 90,000   100,000  
Paid-in capital in excess of par 900,000   910,000  
Retained earnings 3,120,000   2,480,000  

The income before income tax was $610,400 and $534,100 for the current and previous years, respectively.

a.  Determine the ratio of liabilities to stockholders' equity at the end of each year. Round to one decimal place.

Current year  
Previous year  

b.  Determine the times interest earned ratio for both years. Round to one decimal place.

Current year  
Previous year  

c.  The ratio of liabilities to stockholders' equity has   and the times interest earned ratio has   from the previous year. These results are the combined result of a   income before income taxes and   interest expense in the current year compared to the previous year.

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