Cornerstones of Financial Accounting
4th Edition
ISBN: 9781337690881
Author: Jay Rich, Jeff Jones
Publisher: Cengage Learning
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Chapter 9, Problem 105.2C
To determine
Introduction:
Interest income is earned when a company invests money in another company or investment. In such a case, the company receives a regular return which recorded as interest income.
Interest income for U.A. Inc. and C.S. for year 2015 and 2016.
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The following financial information was obtained from the year ended 2024 income statements for Luigi Automotive and Steinbeck Automotive:
(Click the icon to view the financial information.)
Requirements
1. Compute the times-interest-earned ratio for each company. Round to two decimals.
2.
Which company was better able to cover its interest expense?
Requirement 1. Compute the times-interest-earned ratio for each company. Round to two decimals.
Begin by showing the formula for the times-interest-earned ratio.
Times-interest-earned ratio =
C--)
Data table
Net income
Income tax expense
Interest expense
Print
$
Luigi Steinbeck
52,395 $
20,590
550
Done
89,990
26,260
3,100
X
Computing times-interest-earned ratio
The following financial information was obtained from the year ended 2018 income statements for Cash Automotive and Pennington Automotive:
Requirements
Compute the times-interest-earned ratio for each company Round to two decimals.
Which company was better able to cover its interest expense?
Computing NOPAT, NOPM and RNOA
Selected information from the financial statements of GoPro, Inc. is provided below:
($ thousands)
Revenue
Operating income
Net interest expense and other nonoperating expense
Net income
Operating assets
Operating liabilities
2014 $ 121,573
2013 $
64,157
Assume a statutory tax rate of 35%.
a. Compute GoPro's net operating profit after taxes (NOPAT) for 2014 and 2013.
Round answers to the nearest whole number.
2014
2013
2014
2013
$1,392,450 $984,725
b. Compute GoPro's net operating profit margin (NOPM) for each year.
Round answers to one decimal place. (Ex: 0.2345 = 23.5%)
8.7%
6.5 %
187,035 98,703
6,032
7,357
125,888 60,758
815,643 439,716
276,487 254,227
33.6%
c. Compute GoPro's return on net operating assets (RNOA) for 2014.
Round answers to one decimal place. (Ex: 0.2345 = 23.5%)
2014
Chapter 9 Solutions
Cornerstones of Financial Accounting
Ch. 9 - Prob. 1DQCh. 9 - What is the difference between a bond and a note?...Ch. 9 - What does the face (or Par) value of a bond...Ch. 9 - Prob. 4DQCh. 9 - What is the stated or coupon rate of a bond?Ch. 9 - Prob. 6DQCh. 9 - How does a secured bond differ from an unsecured...Ch. 9 - Prob. 8DQCh. 9 - Prob. 9DQCh. 9 - Prob. 10DQ
Ch. 9 - Prob. 11DQCh. 9 - Prob. 12DQCh. 9 - Prob. 13DQCh. 9 - Prob. 14DQCh. 9 - Prob. 15DQCh. 9 - Prob. 16DQCh. 9 - Prob. 17DQCh. 9 - Prob. 18DQCh. 9 - Prob. 19DQCh. 9 - Prob. 20DQCh. 9 - Prob. 21DQCh. 9 - Prob. 22DQCh. 9 - Which of the following statements regarding bonds...Ch. 9 - Prob. 2MCQCh. 9 - If bonds are issued at 101.25, this means that a...Ch. 9 - What best describes the discount on bonds payable...Ch. 9 - The premium on bonds payable account is shown on...Ch. 9 - When bonds are issued by a company, the accounting...Ch. 9 - Prob. 7MCQCh. 9 - Bonds in the amount of $100,000 with a life of 10...Ch. 9 - Prob. 9MCQCh. 9 - Prob. 10MCQCh. 9 - Prob. 11MCQCh. 9 - Prob. 12MCQCh. 9 - Prob. 13MCQCh. 9 - Prob. 14MCQCh. 9 - Prob. 15MCQCh. 9 - Prob. 16MCQCh. 9 - Which of the following statements regarding the...Ch. 9 - Willow Corporations balance sheet showed the...Ch. 9 - Prob. 19MCQCh. 9 - McLaughlin Corporations balance sheet showed the...Ch. 9 - (Appendix 9A) The bond issue price is determined...Ch. 9 - Cornerstone Exercise 9-22 Reporting Long-Term Debt...Ch. 9 - Cornerstone Exercise 9-23 Issuance of Long-Term...Ch. 9 - Cornerstone Exercise 9-24 Issuance of Long-Term...Ch. 9 - Prob. 25CECh. 9 - Cornerstone Exercise 9-26 Debt Issued at Par On...Ch. 9 - Prob. 27CECh. 9 - Cornerstone ExerciseDebt Issued at a Premium...Ch. 9 - Cornerstone Exercise 9-29 Debt issued at a Premium...Ch. 9 - Cornerstone Exercise Debt Issued at a Premium...Ch. 9 - Prob. 31CECh. 9 - Cornerstone Exercise Bonds Issued at a Discount...Ch. 9 - Prob. 33CECh. 9 - Prob. 34CECh. 9 - Prob. 35CECh. 9 - Prob. 36CECh. 9 - Prob. 37CECh. 9 - Prob. 38CECh. 9 - Cornerstone Exercise Ratio Analysis Watterson...Ch. 9 - Cornerstone Exercise Ratio Analysis Blue...Ch. 9 - Cornerstone Exercise Ratio Analysis Red...Ch. 9 - Prob. 42CECh. 9 - Cornerstone Exercise (Appendix 9A) Bond Issue...Ch. 9 - Prob. 44BECh. 9 - Brief Exercise Issuance of Long-Term Debt Natalie...Ch. 9 - Prob. 46BECh. 9 - Prob. 47BECh. 9 - Brief Exercise Debt Issued at Par On January 1,...Ch. 9 - Prob. 49BECh. 9 - Prob. 50BECh. 9 - Brief Exercise Debt Issued at a Premium (Straight...Ch. 9 - Prob. 52BECh. 9 - Prob. 53BECh. 9 - Prob. 54BECh. 9 - Prob. 55BECh. 9 - Brief ExerciseBonds Issued at a Premium (Effective...Ch. 9 - Prob. 57BECh. 9 - Brief Exercise Bonds issued at a Premium...Ch. 9 - Brief Exercise Cost of Debt Financing Topple...Ch. 9 - Prob. 60BECh. 9 - Brief Exercise Ratio Analysis Whitten Corporations...Ch. 9 - Brief ExerciseRatio Analysis Valiant Corporation...Ch. 9 - Brief Exercise Ratio Analysis Trevor Corporation...Ch. 9 - Brief Exercise (Appendix 9A) Bond Issue Price On...Ch. 9 - Prob. 65BECh. 9 - Prob. 66ECh. 9 - Exercise Bond Premium and Discount Markway Inc. is...Ch. 9 - Exercise Bonds with Annual Interest Payments Kiwi...Ch. 9 - Exercise Issuance and Interest Amortization for...Ch. 9 - Prob. 70ECh. 9 - Prob. 71ECh. 9 - Exercise Interest Payments and Interest Expense...Ch. 9 - Prob. 73ECh. 9 - Prob. 74ECh. 9 - Prob. 75ECh. 9 - Prob. 76ECh. 9 - Prob. 77ECh. 9 - Prob. 78ECh. 9 - Prob. 79ECh. 9 - Prob. 80ECh. 9 - Prob. 81ECh. 9 - Prob. 82ECh. 9 - Prob. 83ECh. 9 - Prob. 84ECh. 9 - ExerciseInstallment Notes ABC bank loans $250,000...Ch. 9 - Prob. 86ECh. 9 - Cost of Debt Financing Stinson Corporations cost...Ch. 9 - Cost of Debt Financing Diamond Companys cost of...Ch. 9 - Ratio Analysis Rising Stars Academy provided the...Ch. 9 - Prob. 90ECh. 9 - Problem Reporting Long-Term Debt Fridley...Ch. 9 - Prob. 92PSACh. 9 - Prob. 93PSACh. 9 - Prob. 94PSACh. 9 - Prob. 95PSACh. 9 - Prob. 96PSACh. 9 - Prob. 97PSACh. 9 - Prob. 98PSACh. 9 - Prob. 99PSACh. 9 - Prob. 91PSBCh. 9 - Prob. 92PSBCh. 9 - Prob. 93PSBCh. 9 - Prob. 94PSBCh. 9 - Prob. 95PSBCh. 9 - Prob. 96PSBCh. 9 - Prob. 97PSBCh. 9 - Prob. 98PSBCh. 9 - Prob. 99PSBCh. 9 - Long-Term Debt and Ethics You arc the CFO of...Ch. 9 - Debtholders receive note contracts, one for each...Ch. 9 - Debtholders receive note contracts, one for each...Ch. 9 - Prob. 102.1CCh. 9 - Prob. 102.2CCh. 9 - Prob. 102.3CCh. 9 - Prob. 102.4CCh. 9 - Leverage Cook Corporation issued financial...Ch. 9 - Prob. 103.2CCh. 9 - Prob. 103.3CCh. 9 - Prob. 103.4CCh. 9 - Prob. 104.1CCh. 9 - Prob. 104.2CCh. 9 - Prob. 104.3CCh. 9 - Prob. 104.4CCh. 9 - Prob. 105.1CCh. 9 - Prob. 105.2CCh. 9 - Prob. 105.3CCh. 9 - Prob. 105.4CCh. 9 - Prob. 105.5CCh. 9 - Comparative Analysis: Under Armour, Inc., versus...Ch. 9 - Prob. 105.7CCh. 9 - Prob. 106.1CCh. 9 - Prob. 106.2CCh. 9 - Prob. 106.3C
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