The following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years: Current YearPrevious YearAccounts payable$576,000 $280,000 Current maturities of serial bonds payable510,000 510,000 Serial bonds payable, 10%2,290,000 2,800,000 Common stock, $1 par value80,000 110,000 Paid-in capital in excess of par930,000 930,000 Retained earnings3,210,000 2,550,000 The income before income tax was $1,064,000 and $931,000 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 yearfill in the blank 1Previous yearfill in the blank 2b. Determine the times interest earned ratio for both years. Round to one decimal place.Current yearfill in the blank 3Previous yearfill in the blank 4c. 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. ### Ratio of Liabilities to Stockholders' Equity and Times Interest EarnedThe following data were taken from the financial statements of Hunter Inc. for December 31 of two recent years:| Account Description | Current Year | Previous Year ||----------------------------------------------|--------------|---------------|| Accounts payable | $576,000 | $280,000 || Current maturities of serial bonds payable | $510,000 | $510,000 || Serial bonds payable, 10% | $2,290,000 | $2,800,000 || Common stock, $1 par value | $80,000 | $110,000 || Paid-in capital in excess of par | $930,000 | $930,000 || Retained earnings | $3,210,000 | $2,550,000 |The income before income tax was $1,064,000 and $931,000 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:** [Input required]- **Previous Year:** [Input required]**b. Determine the times interest earned ratio for both years. Round to one decimal place.**- **Current Year:** [Input required]- **Previous Year:** [Input required]**c. Analyze the changes in the ratio of liabilities to stockholders' equity and the times interest earned ratio from the previous year to the current year. These results reflect the combined impact of changes in income before income taxes and interest expenses in the current year compared to the previous year.**- The ratio of liabilities to stockholders' equity has [Answer: Decreased/Increased]- The times interest earned ratio has [Answer: Decreased/Increased]This analysis will help to understand how the financial leverage and interest coverage ratios of Hunter Inc. have evolved over the past two years.

The ratio analysis is helpful to analyze the financial statements of the business for future…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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	$576,000		$280,000
Current maturities of serial bonds payable	510,000		510,000
Serial bonds payable, 10%	2,290,000		2,800,000
Common stock, $1 par value	80,000		110,000
Paid-in capital in excess of par	930,000		930,000
Retained earnings	3,210,000		2,550,000

The income before income tax was $1,064,000 and $931,000 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	fill in the blank 1
Previous year	fill in the blank 2

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

Current year	fill in the blank 3
Previous year	fill in the blank 4

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.

### 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:

| Account Description | Current Year | Previous Year |
|----------------------------------------------|--------------|---------------|
| Accounts payable | $576,000 | $280,000 |
| Current maturities of serial bonds payable | $510,000 | $510,000 |
| Serial bonds payable, 10% | $2,290,000 | $2,800,000 |
| Common stock, $1 par value | $80,000 | $110,000 |
| Paid-in capital in excess of par | $930,000 | $930,000 |
| Retained earnings | $3,210,000 | $2,550,000 |

The income before income tax was $1,064,000 and $931,000 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:** [Input required]
- **Previous Year:** [Input required]

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

- **Current Year:** [Input required]
- **Previous Year:** [Input required]

**c. Analyze the changes in the ratio of liabilities to stockholders' equity and the times interest earned ratio from the previous year to the current year. These results reflect the combined impact of changes in income before income taxes and interest expenses in the current year compared to the previous year.**

- The ratio of liabilities to stockholders' equity has [Answer: Decreased/Increased]
- The times interest earned ratio has [Answer: Decreased/Increased]

This analysis will help to understand how the financial leverage and interest coverage ratios of Hunter Inc. have evolved over the past two years.

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