Hsu Company reported the following on its income statement: $\begin{array}{ll}
\$ 420,000 & \text { Income before income taxes } \
120,000 & \text { Income tax expense } \
\$ 300,000 & \text { Net income }
\end{array}$ An analysis of the income statement revealed that interest expense was $80,000. Hsu Company's times interest earned was
A) 8 times.
B) 6.25 times.
C) 5.25 times.
D) 5 times.

Question

Quizplus · Accepted Answer

Times interest earned is calculated as (Income before income taxes + Interest expense) / Interest expense. Here, it is ($420,000 + $80,000) / $80,000 = 6.25 times.

Hsu Company Reported the Following on Its Income Statement An Analysis of the Income Statement Revealed That Interest Expense