Author Question: The income statement for Otto Construction Company appears below:Net sales (all credit ... (Read 36 times)

ncasson210 · **on:** Feb 5, 2023

Question 1

The 2021 and 2022 partial balance sheets for Ottoman Manufacturing Company appear below:

2021

2022

Current liabilities	$ 20,000	$ 30,000
Noncurrent liabilities	60,000	40,000
Total liabilities	80,000	70,000
Stockholders' equity
Common stock	2,000	2,000
Additional paid-In capital	4,000	4,000
Retained earnings	40,000	26,000
Total stockholders' equity	46,000	32,000
Total liabilities and stockholders' equity	$126,000	$102,000

What is the debt-to-equity ratio for 2022?
◦ 2.19
◦ 1.80
◦ 0.46
◦ 1.25

Question 2

The income statement for Otto Construction Company appears below:

Net sales (all credit sales)	$180,000
Cost of goods sold	100,000
Gross margin	80,000
Operating expenses	30,000
Interest expense	12,000
Income before taxes	38,000
Income tax	9,500
Net income	$ 28,500

Average total assets total $240,000. Otto's income tax rate is 25%. What is the times interest earned ratio?
◦ 3.16
◦ 2.38
◦ 4.17
◦ 3.13

Sha · **Reply #1 on:** Feb 5, 2023

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