Hsu Company reported the following on its income statement: 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

Hsu Company reported the following on its income statement:  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.

Quizplus · Accepted Answer

Times Interest Earned = (Operating Income + Interest Expense)/Interest Expense
= (600,000 + 80,000)/80,000
= 7.5 times
Therefore, the closest option is B, which is 6.25 times.

Hsu Company Reported the Following on Its Income Statement