Assignment Financial Reporting & Analysis

# Assignment Financial Reporting & Analysis - 1.Laura...

• Homework Help
• 12
• 100% (1) 1 out of 1 people found this document helpful

This preview shows pages 1–5. Sign up to view the full content.

1 1.Laura Bella Company reports the following statement of income: Operating Revenues \$4,800 Costs and Expenses: Cost of Sales (2,000) Selling, Service, Administrative, and General Expense (1,500) Income Before Interest Expense and Income Taxes \$1,300 Interest Expense (180) Income Before Income Taxes \$1,120 Income Taxes (350) Net Income \$ 770 Note: Depreciation expense totals \$300; preferred dividends total \$60; operating lease payments total \$180. Assume that 1/3 of operating lease payments is for interest. Required: a. Compute the times interest earned. Times Interest Earned = Recurring Earnings, Excluding Interest Expense, tax Expense, Equity Earnings, and Non controlling Interest Interest Expense, Including Capitalized Interest Income before income taxes \$1,120 Plus interest 180 Adjusted income \$1,300 (A) Interest expense \$ 180 (B) (A) \$1,300/(B) \$180 = 7.22 times

This preview has intentionally blurred sections. Sign up to view the full version.

2 b. Compute the fixed charge coverage. Fixed Charge Coverage = Recurring Earnings, Excluding Interest Expense, tax Expense, Equity Earnings, and Noncontrolling Interest + interest portion of rentals Interest Expense, Including Capitalized Interest + interest portion of rentals Income before income taxes \$1,120 Plus interest 180 Adjusted income \$1,300 1/3 of operating lease payments (1/3  \$180) 60 \$1,360 Interest expense \$180 1/3 of operating lease payments 60 \$240 Fixed charge coverage = \$1,360 = 5.67 times \$240
3 2.The following information is computed from Fast Food Chain’s annual report for 2008. 2008 2007 Current assets \$ 2,731,020 \$ 2,364,916 Property and equipment, net 10,960,286 8,516,833 Intangible assets, at cost less applicable amortization 294,775 255,919 \$13,986,081 \$11,137,668 Current liabilities \$ 3,168,123 \$ 2,210,735 Deferred federal income taxes 160,000 26,000 Mortgage note payable 456,000 Stockholders' equity 10,201,958 8,900,933 \$13,986,081 \$11,137,668 Net sales \$33,410,599 \$25,804,285 Cost of goods sold (30,168,715) (23,159,745) Selling and administrative expense (2,000,000) (1,500,000) Interest expense (216,936) (39,456) Income tax expense (400,000) (300,000) Net income \$ 624,948 \$ 805,084 Note: One-third of the operating lease rental charge was \$100,000 in 2010 and \$50,000 in 2009. Capitalized interest totaled \$30,000 in 2010 and \$20,000 in 2009.

This preview has intentionally blurred sections. Sign up to view the full version.

4 Required: a. Based on the above data for both years, compute: 1. Times Interest Earned = Recurring Earnings, Excluding Interest Expense, tax Expense, Equity Earnings, and Non controlling Interest Interest Expense, Including Capitalized Interest 2008 2007 Net Sales \$ 33,410,599 \$25,804,285 Less Cost of Goods Sold (30,168,715) 23,159,745) Selling and Administrative (2,000,000) (1,500,000) (A) \$ 1,241,884 \$ 1,144,540 Interest Expense \$ 216,936 \$ 39,456 Capitalized Interest 30,000 20,000 Total Interest (B) \$ 246,936 \$ 59,456 (A)/(B) 5.03 times 19.25 times 2. Fixed Charge Interest = Recurring Earnings, Excluding Interest Expense, tax Expense, Equity Earnings, and Noncontrolling Interest + interest portion of rentals
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern