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 Wizard Computers 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 Required: 2018 $ 114,000 67,000 2017 $ 141,000 77,100 47,000 63,900 37,400 39,800 640 545 8,960 2,000 23,555 6,400 $ 6,960 $ 17,155 1. Compute the times interest earned ratios for 2018 and 2017. 2. Does Wizard generate sufficient net income in both years (before taxes and interest) to cover the cost of debt financing? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the times interest earned ratios for 2018 and 2017. (Round your answers to 1 decimal place.) Times Interest Year Earned
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 Wizard Computers 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 Required: 2018 $ 114,000 67,000 2017 $ 141,000 77,100 47,000 63,900 37,400 39,800 640 545 8,960 2,000 23,555 6,400 $ 6,960 $ 17,155 1. Compute the times interest earned ratios for 2018 and 2017. 2. Does Wizard generate sufficient net income in both years (before taxes and interest) to cover the cost of debt financing? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the times interest earned ratios for 2018 and 2017. (Round your answers to 1 decimal place.) Times Interest Year Earned
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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