
Concept explainers
Interest Expense and Net Income: The interest Expense is the expense other than operating expenses and is considered as an obligation on the entity to be paid. The net income is calculated after deducting interest expense and income tax expense from the operating income.
Times interest earned ratio: It is the measure of a company’s ability to pay its debts obligations or interest obligations.
The formula of times interest earned ratio is –
Requirement 1
To determine:
Times-interest-earned ratio for Cash and Pennington
Requirement 2:
To determine:
The company which has better ability to cover its interest expense.

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Chapter 11 Solutions
Horngren's Accounting, The Financial Chapters, Student Value Edition Plus MyLab Accounting with Pearson eText - Access Card Package (12th Edition)
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