《ch11 Financial Accounting 财务会计》由会员分享，可在线阅读，更多相关《ch11 Financial Accounting 财务会计（100页珍藏版）》请在金锄头文库上搜索。
1、CHAPTER 11LIABILITIES 负债负债Study ObjectivesCurrent liabilityAccounting for notes payableBonds and the types of bonds.Entries for the issuance of bonds and interest expenseAccounting for long-term notes payableCURRENT LIABILITIES 流动负债流动负债A Current Liability is a debt that can reasonably be expected to
2、 be paid:-from existing current assets or in the creation of other current liabilities and -within one year or the operating cycle, whichever is longerCURRENT LIABILITIESCurrent liabilities include:-Notes Payable 应付票据应付票据-Accounts Payable 应付账款应付账款-Unearned Revenues 预收款预收款-Accrued Liabilities 应计负债应计负
3、债NOTES PAYABLE 应付票据应付票据Notes Payable are obligations in the form of written promissory notes that usually require the borrower to pay interest.Notes payable may be used instead of accounts payable because it supplies documentation of the obligation in case legal remedies are needed to collect the de
4、bt.Notes due for payment within one year of the balance sheet date are usually classified as current liabilitiesWhen an interest-bearing note is issued, the assets received generally equal the face value of the note. Assume First National Bank agrees to lend $100,000 on March 1, 2002 if Cole William
5、s Co. signs a $100,000, 12%, 4-month note. Cash is debited and Notes Payable is creditedDate Accounts title DRCRMar 1 Cash 100,000 Notes payable 100,000To record issue of notes Interest accrues over the life of the note and must be recorded periodically. If Cole Williams Co. prepares financial state
6、ments semiannually, an adjusting entry is required to recognize interest expense and interest payable of $4,000 at June 30.Date Accounts title DRCRJune 30 Interest expense 4,000 Interest payable 4,000To record issue of notes At maturity, Notes Payable is debited for the face value of the note, Inter
7、est Payable is debited for the amount of accrued interest, and Cash is credited for the maturity value of the note. Date Accounts title DRCRJuly 1 Notes payable 100,000Interest payable4,000 Cash 104,000To record issue of notes SALES TAXES PAYABLE 应付销售税应付销售税Sales tax is expressed as a stated percenta
8、ge of the sales price on goods sold to customers by a retailerThe retailer (or selling company) collects the tax from the customer when the sale occurs, and periodically (usually monthly) remits the collections to the states department of revenueThus, the retailer serves as a collection agent for th
9、e taxing authorityIf on March 25th cash register readings for Cooley Grocery show sales of $10,000 and sales taxes of $600 (sales tax rate is 6%), the entry is a debit to Cash for the total, and a credit to Sales for the actual sales and Sales Taxes Payable for the amount of the sales tax.Accounts t
10、itle DRCRCash 10,600 Sales 10,000 Sales taxes payable 600SALES TAXES PAYABLEWhen sales taxes are not rung up separately on the cash register, total receipts are divided by 100% plus the sales tax percentage to determine the sales, and the difference is sales taxIf Cooley Grocery “rings up” total rec
11、eipts, which are $10,600, and the sales tax percentage is 6%, we can figure sales as follows:$10,600 1.06 = $10,000SALES TAXES PAYABLEIn China, sale tax rate is 17%.When you bought goods in supermarket, you paid $1170.For the supermarket, sales revenue is: 1170 / (1+17%) =1000 Sales tax = 1170 1000
12、=170PAYROLL AND PAYROLL TAXES PAYABLE 工资及相关的税工资及相关的税The term payroll工资工资 pertains to all wages and salaries payable owed to employeesWithholding taxes 须扣税款须扣税款:-must be withheld from employees gross pay-consist of social security (FICA) taxes社会保社会保障税障税 and federal and state income taxes联邦联邦和州所得税和州所得
13、税, and-are credited to appropriate liability accountsA corporation records its payroll for the pay period ending March 7 with the journal entry above. Salaries and Wages Expense is debited for $100,000 in gross earnings. Specific liability accounts are credited for the deductions made during the pay
14、 period. Salaries and Wages Payable is credited for $67,964 in net earnings. Accounts title DRCRSalaries and Wages expense 100,000 FICA Taxes payable 7,250 Federal income tax payable 21,864 State income tax payable 2,922 Salaries and wages payable 67,964To record payroll The entry to record payment
15、of the March 7 payroll is a debit to Salaries and Wages Payable and a credit to Cash. When currency is used in payment, one check is prepared for the amount of net earnings ($67,964).Accounts title DRCRSalaries payable 67,964 Cash 67,964PAYROLL DEDUCTIONSGross PayFICA TaxesFederal Income TaxState &
16、City Income TaxesCharityInsurance, Pensions, &/or Union DuesNet PayEMPLOYER PAYROLL TAXES 雇主工资税雇主工资税Payroll Tax Expense for businesses and educational institutions results from 3 taxes levied on employers by governmental agencies-The employer must match each employees FICA contribution resulting in
17、payroll tax expense to the employerEMPLOYER PAYROLL TAXES 雇主工资税雇主工资税-Federal unemployment taxes联邦失业税联邦失业税 (FUTA) provide benefits for a limited time period to employees who lose their jobs through no fault of their own. FUTA is a tax borne entirely by the employer.-State unemployment taxes州失业税州失业税 (
18、SUTA) also provide benefits to employees who lose their jobs and are borne entirely by the employer.The entry to record the payroll tax expense associated with the March 7 payroll results in a debit to Payroll Tax Expense for $13,450, a credit to FICA Taxes Payable for $7,250 ($100,000 X 7.25%), a c
19、redit to FUTA Payable for $800 ($100,000 X 0.8%), and a credit to SUTA Payable for $5,400 ($100,000 X 5.4%). Accounts title DRCRPayroll taxes expense 13,450 FICA Taxes payable 7,250 FUTA payable 800 SUTA payable 5,400To record payroll UNEARNED REVENUES 预收款预收款Unearned Revenues (advances from customer
20、s) occur when a company receives cash before a service is renderedExamples are when an airline sells a ticket for future flights or when an attorney receives legal fees before work is doneUNEARNED REVENUES 预收款预收款How do companies account for unearned revenues that are received before goods are delive
21、red or services are rendered?-When the advance is received, Cash is debited, and a current liability account identifying the source of the unearned revenue is credited-When the the revenue is earned, the unearned revenue account is debited, and an earned revenue account is creditedIf Superior Univer
22、sity sells 10,000 season football tickets at $50 each for its five-game home schedule, the entry for the sale of the tickets is a debit to Cash for the advance received, and a credit to Unearned Football Ticket Revenue, a current liability.Accounts title DRCRCash 500000 Unearned revenue500000As each
23、 game is completed, the Unearned Football Ticket Revenue account is debited for 1/5 of the unearned revenue, and the earned revenue, Football Ticket Revenue, is credited.Accounts title DRCRUnearned revenue 100000 Revenue 100000UNEARNED AND EARNED REVENUE ACCOUNTSType of Business Account Title Unearn
24、ed revenue Earned revenue Airline Unearned passenger ticket RPassenger ticket RMagazine publisher Unearned subscription RSubscription RHotel Unearned rental RRental RInsurance Co. Unearned premium RPremium R CURRENT MATURITIES OF LONG-TERM DEBTAnother item classified as a current liability is curren
25、t maturities of long-term debt一年内到一年内到期的长期负债期的长期负债.Current maturities of long-term debt are often identified on the balance sheet as long-term debt due within one year.FINANCIAL STATEMENT PRESENTATIONCurrent liabilities are the first category under liabilities on the balance sheetEach of the princip
26、al types of current liabilities is listed separatelyCurrent liabilities are usually in order of magnitude with the largest obligations being listed firstHowever, many companies, as a matter of custom, show notes payable and accounts payable first regardless of amountBALANCE SHEET PRESENTATION OF CUR
27、RENT LIABILITIESLine of credit $16.9Accounts payable 96.2Reserve for returns 9.1Accrued liabilities 41.1Accrued profit sharing 2.4Income taxes payable 13.2Total current liabilities 178.9 WORKING CAPITAL 营运资金营运资金The excess of current assets over current liabilities is working capital. The formula for
28、 the computation of Lands End working capital is shown above.CurrentLiabilitiesWorking CapitalCurrent Assets$321.7 - $178.9 = $142.8CURRENT RATIO 流动比率流动比率CurrentLiabilitiesCurrent RatioCurrent Assets$321.7 $178.9 = 1.8:1The current ratio permits us to compare the liquidity of different sized compani
29、es and of a single company at different times. The current ratio is determined by dividing current assets by current liabilities. The formula for the computation of Lands End current ratio is shown above.LONG-TERM LIABILITIES 长期负债长期负债Long-term liabilities are obligations that are expected to be paid
30、 after one year and are usually in the form of bonds or long-term notesBonds债券债券 are a form of interest bearing notes payable issued by-corporations, and-governmental agenciesBOND BASICSCorporate management usually decides whether to issue bonds (debt financing债务融债务融资资) or common stock (equity finan
31、cing权益融权益融资资).ADVANTAGES OF BOND FINANCING OVER COMMON STOCKFrom the standpoint of the corporation seeking long-term financing, bonds offer the following advantages over common stock.ADVANTAGES OF BOND FINANCING OVER COMMON STOCKFrom the standpoint of the corporation seeking long-term financing, bon
32、ds offer the following advantages over common stock-Stockholder control is not affected： Bondholders do not have voting rights, so current owners (stockholders) retain full control of the companyADVANTAGES OF BOND FINANCING OVER COMMON STOCK-Tax savings result： Bond interest is deductible for tax pu
33、rposes; dividends on stock are not-Earnings per share on common stock may be higher： Although bond interest expense reduces net income, earnings per share on common stock often is higher under bond financing because no additional shares of common stock are issued.EFFECTS ON EARNINGS PER SHARE STOCKS
34、 VS. BONDS 对对EPS的影响的影响Microsystems, Inc. is considering two plans for financing the construction of a new $5 million plant:-Plan A involves the issuance of 200,000 shares of common stock at the current market price of $25 per share-Plan B involves the issuance of $5 million, 12% bonds at face valueE
35、FFECTS ON EARNINGS PER SHARE STOCKS VS. BONDS 对对EPS的影响的影响Microsystems currently has 100,000 shares of common stock outstanding. Income before interest and taxes will be $1.5 million on the new plant;income taxes are expected to be 30%.Plan A : issue Stocks Income before interest and taxes1,500,000Le
36、ss: interest 0Income before taxes 1,500,000Less: income tax expense (30%) 450,000Net income 1,050,000Outstanding shares (100,000 +200,000) 300,000Earnings per share 3.50Stocks EFFECTS ON EARNINGS PER SHARE Plan B : issue BondsIncome before interest and taxes1,500,000Less: interest (12% 5,000,000) 60
37、0,000Income before taxes 900,000Less: income tax expense (30%) 270,000Net income 630,000Outstanding shares 100,000Earnings per share 6.30Bonds EFFECTS ON EARNINGS PER SHARETYPES OF BONDS 债券类型债券类型Secured and Unsecured Bonds-Secured bonds抵押债券抵押债券 have specific assets of the issuer pledged as collatera
38、l-Unsecured bonds信用债券信用债券 are issued against the general credit of the borrowerTerm and Serial Bonds-Term bonds定期债券定期债券 mature at a single specify future date.-Serial bonds分期债券分期债券 mature in installmentsTYPES OF BONDS 债券类型债券类型Registered and Bearer Bonds-Registered bonds记名债券记名债券 are issued in the nam
39、e of the owner-Bearer (or coupon) bonds无记名债券无记名债券 are not registered and require holders to send in coupons to receive interest payments.TYPES OF BONDS 债券类型债券类型Convertible and Callable Bonds-Convertible bonds可转换债券可转换债券 can be converted into common stock at the bondholders option-Callable bonds可续回债券可
40、续回债券 are subject to retirement at a stated dollar amount prior to maturity at the option of the issuerISSUING PROCEDURES 发行步骤发行步骤In authorizing the bond issue the board of directors must stipulate-the total number of bonds to be authorized, total face value面值面值, and-the contractual interest rate 票面利
41、率票面利率The face value is the amount of principal due at the maturity dateThe contractual interest rate (or stated rate) is the rate used to determine the amount of cash interest the borrower pays and the investor receivesISSUING PROCEDURESA bond indenture债券契约债券契约 is a legal document that sets forth th
42、e terms of the bond issueA bond certificate provides such information as:-name of the issuer-face value of the bonds-contractual interest rate, and-maturity date到期日到期日 of the bondsDETERMINING THE MARKET VALUE OF BONDSThe market value 市场价值市场价值 (present value 现值现值) of a bond is a function of three fac
43、tors:-the dollar amounts to be received-the length of time until the amounts are received, and-the market rate of interest 市场利率市场利率I1= interest = Face value stated interest rate =FV RK: market rate for bond If K increase, the PV will decrease If k decrease, the PV will increase When k=R, the PV= FV
44、DETERMINING THE MARKET VALUE OF BONDSThe market interest rate is the rate investors demand for loaning funds to the corporationThe process of finding the present value is referred to as discounting 折现折现 the future amountsCOMPUTING THE MARKET PRICE OF BONDSOn January 1, 2002, Kell Company issues $100
45、,000 of 9% bonds, due in 5 years, with interest payable annually at year-endEach purchaser of the bonds would receive the following 2 cash payments:-$100,000 principal to be paid at maturity and-Five $9,000 interest payments ($100,000 X 9%) over the term of the bonds 0 1 2 3 4 5 9 9 9 9 9 100PV = 64
46、,993 + 35,007 = 100,000 The present values of these amounts are shown belowPresent value of $100,000 received in 5 years$ 64,993Present value of $9,000 received annually for 5 years $ 35, 007Market price of bonds $100,000ACCOUNTING FOR BOND ISSUES ISSUING BONDS AT FACE VALUEDevor Corporation issues
47、1,000, 10 year, 9% bonds dated January 1, 2002, at 100 (100% of face value). The entry to record the sale is: Date Accounts title DRCRJan 1 Cash 1,000,000 Bonds payable 1,000,000Bonds payable are reported in the long-term liabilities section of the balance sheet since the maturity date is January 1,
48、 2012 (more than 1 year away). The entry for the interest payment on July 1, 2002, assuming no previous accrual of interest, is: Date Accounts title DRCRJuly 1Bond interest expense 45,000 Cash 45,000At December 31, an adjusting entry is required to recognize the $45,000 of interest expense incurred
49、since July 1. Bond interest payable is classified as a current liability, since it is scheduled for payment within the next year. The entry is: Date Accounts title DRCRDec 31Bond interest expense 45,000 Bond interest payable 45,000INTEREST RATES AND BOND PRICESBond Contractual Interest Rate 10%Marke
50、t Interest Rate8%10%12%Bonds Sell atDiscountPremiumFace ValueIssued whenACCOUNTING FOR BOND ISSUES ISSUING BONDS AT A DISCOUNT 折扣发行折扣发行If the market interest rate is greater than the contractual interest rate, the issuing corporation will sell the bonds at a price less than face value at a discount.
51、 At January 1, 2002, Candlestick, Inc. sells $100,000, 5-year, 10% bonds for $92,639 with interest payable on July 1 and January 1. The entry to record the issuance is: ACCOUNTING FOR BOND ISSUES ISSUING BONDS AT A DISCOUNT 折扣发行折扣发行Date Accounts title DRCRJan 1Cash 92,639Discount on Bond payable 7,3
52、61 Bond payable 100,000STATEMENT PRESENTATION OF DISCOUNT ON BONDS PAYABLEDiscount on Bonds Payable-has a debit balance-is a contra account, and-is deducted from Bonds Payableon the balance sheet, the $92,639 represents the carrying value (or book value) of the bonds, which on the date of issuance i
53、s equal to the market value of the bondsTOTAL COST OF BORROWING 借款成借款成本本 BONDS ISSUED AT A DISCOUNTThe difference between the issuance price and the face value of the bonds the discount is an additional cost of borrowing that should be recorded as bond interest expense over the life of the bonds. Th
54、e total cost of borrowing $92,639 for Candlestick, Inc. is $57,361, computed as follows: Bonds issued at a Discount Semiannual interest payments ($ 100,000 10% 0.5 = $5000; $5000 10 = $50,000 $50,000Add: bond discount (100,000 92,361) 7,361Total cost of borrowing $57,361 Bonds issued at a Discount P
55、rincipal at maturity 100,000Add: Semiannual interest payments$50,000Cash to be paid to bondholders $150,000Less: cash received from bondholders 92,639Total cost of borrowing $57,361Alternatively the total cost of borrowing can be determined as follows : BOND DISCOUNT AMORTIZATION 折扣摊销折扣摊销Bond discou
56、nt should be allocated systematically to each accounting period benefiting from the use of the cash proceedsThe straight-line method of amortization allocates the same amount to interest expense in each interest periodThe amount is determined as shown below:Number of InterestPeriodsBond Discount Amo
57、rtizationBond DiscountIn this example, the bond discount amortization is $736 ($7,361 10). The entry to record the payment of bond interest and the amortization of bond discount on July 1, 2002 is: Date Accounts DRCRJuly 1Bond interest expense 5736 Discount on bonds payable 736 Cash 5000ACCOUNTING F
58、OR BOND ISSUES ISSUING BONDS AT A DISCOUNTThe December 31 adjusting entry is shown below. The interest has to be accrued and the discount amortized, since payment will not be made until the next yearDate Accounts DRCRDec3 1Bond interest expense 5736 Discount on bonds payable 736 Interest payable 500
59、0ACCOUNTING FOR BOND ISSUES ISSUING BONDS AT A PREMIUM 溢价发行溢价发行If the market interest rate is less than the contractual interest rate, the issuing corporation will sell the bonds at a price greater than face value at a premium.At January 1, 2002, Candlestick, Inc. sells $100,000, 5-year, 10% bonds f
60、or $108,111 with interest payable on July 1 and January 1. The entry to record the issuance is: Date Accounts title DRCRJan 1Cash 108,111 Premium on Bond payable 8,111 Bond payable 100,000STATEMENT PRESENTATION OF BOND PREMIUMPremium on Bonds Payable-has a credit balance and-is added to Bonds Payabl
61、e on the balance sheet, as shown belowThe $108,111 represents the carrying value (or book value) of the bonds, which on the date of issuance is equal to the market value of the bonds.STATEMENT PRESENTATION OF BOND PREMIUMLong-term liabilities:Bond Payable 100,000Add: Premium on Bonds Payable 8,111TO
62、TAL COST OF BORROWING BONDS ISSUED AT A PREMIUMThe difference between the issuance price and the face value of the bonds the premium is a reduction in the cost of borrowing that should be recorded as a decrease in bond interest expense over the life of the bondsThe total cost of borrowing $108,111 f
63、or Candlestick, Inc. is $41,889, computed as follows: Bond issued at a premium Semiannual payments of interests$50,000Less: bond premium (108111-100000)8,111Total cost of borrowing 41,889 Bond issued at a premium Principal at maturity $100,000Add: semiannual interest payments 50,000Cash to be paid t
64、o bondholders 150,000Less: cash received from bondholders 108,111Total cost of borrowing 41,889 Alternatively the total cost of borrowing can be determined as follows:ACCOUNTING FOR BOND ISSUES ISSUING BONDS AT A PREMIUMIn this example, the bond premium amortization is $811 ($8,111 10).The entry to
65、record the payment of bond interest and the amortization of bond premium on July 1 is:Date Accounts DRCRJuly 1Bond interest expense 4189Premium on bonds payable 811 Cash 5000Date Accounts DRCRDec31 Bond interest expense 4189Premium on bonds payable 811 Interest payable 5000The December 31 adjusting
66、entry is shown below. The interest to be paid on January 1 must be accruedACCOUNTING FOR BOND RETIREMENTS REDEEMING BONDS AT MATURITYRegardless of the issuance price of the bonds, the book value of the bonds at maturity will equal their face valueThe entry to record the redemption of the Deer Corp.
67、bonds at maturity, assuming that the interest for the last interest period is paid and recorded separately, is:Date Accounts DRCRJan1 Bond Payable 100,000 Cash 100,000 (to record redemption of bond at maturity ) ACCOUNTING FOR BOND RETIREMENTS REDEEMING BONDS BEFORE MATURITYA corporation may decide
68、to retire bonds before maturity to lower interest expense and remove debt from its balance sheetDebt should be retired early only if the corporation has sufficient cash resourcesACCOUNTING FOR BOND RETIREMENTS REDEEMING BONDS BEFORE MATURITYWhen bonds are retired before maturity, it is necessary to:
69、-eliminate the carrying value of the bonds at the redemption date-record the cash paid-recognize the gain or loss on redemptionThe carrying value of the bonds is the face value of the bonds less (plus) unamortized bond discount (premium) at the redemption dateACCOUNTING FOR BOND RETIREMENTS REDEEMIN
70、G BONDS BEFORE MATURITYCandlestick, Inc. at the end of the eighth period (having sold its bonds at a premium) retires its bonds at 103 after paying the semiannual interestCandlestick, Inc. at the end of the eighth period (having sold its bonds at a premium) retires its bonds at 103 after paying the
71、semiannual interestGains or losses on early bond redemption are reported in the income statement as extraordinary items 非常项目非常项目 as required by GAAP:Date Accounts DRCRJan 1 Bonds payable 100,000Premium on bonds payable 1,623Loss on bond redemption 1,377 Cash 103,000ACCOUNTING FOR BOND RETIREMENTS CO
72、NVERTING BONDS INTO COMMON STOCKWhen the conversion of bonds into common stock债券转换成普通股票债券转换成普通股票 is recorded, the current market values of the bonds and stock are ignored. On July 1, Saunders Associates converts $100,000 of bonds sold at face value into 2,000 shares of $10 par value common stock. Bo
73、th the bonds and the stock have a market value of $130,000, which is not considered in making the entryDate Accounts DRCRJuly 1Bonds payable 100,000 Common Stock 20,000 Paid in capital in excess of par value 80,000ACCOUNTING FOR LONG-TERM NOTES PAYABLELong-term notes payable长期应付票据长期应付票据 are similar
74、to short-term interest-bearing notes payable except that the terms of the notes exceed one yearA long-term note may be secured by a document called a mortgage 抵押抵押 that pledges title to specific assets as security (collateral担担保保) for a loanACCOUNTING FOR LONG-TERM NOTES PAYABLEMortgage notes payabl
75、e are widely used in:-the purchase of homes by individuals and-the acquisition of plant assets by many small and some large companiesMORTGAGE INSTALLMENT PAYMENT SCHEDULE抵押分期付款抵押分期付款Each mortgage installment payment consists of:-interest on the unpaid balance of the loan and-a reduction of loan prin
76、cipalPorter Technology Inc. issues a $500,000, 12%, 20-year mortgage note on December 31, 2002 to finance the construction of new research laboratoryThe installment payment schedule for the first 2 years is:SemiannualInterest Period Cash Payment (A)Interest Expense (D) 6%(B) ReductionOf principal(A)
77、-(B) (C) (D) Principal Balance (D) (C)Issue date 500,000133,23130,0003,231496,769233,23129,8063,425493,344333,23129,6013,630489,714433,23129,3833,848485,866The entries to record the mortgage loan and the first installment payment are as followsDate Accounts DRCRDec 31Cash 500,000 Mortgage Notes paya
78、ble 500,000June30 Interest expense 30,000Mortgage notes payable 3231 Cash 33,231In the balance sheet, the reduction in principal for the next year is reported as a current liability, and the remaining unpaid principal balance is classified as a long-term liability.ACCOUNTING FOR LONG-TERM NOTES PAYA
79、BLEBALANCE SHEET PRESENTATION OF LONG-TERM LIABILITIESLong term Liabilities: Bonds payable 10% due in 2009 $1,000,000Less: Discount on bonds payable 80,000 920,000Mortgage notes payable 11% due in 2011 $ 500,000Lease liability $ 540,000Total long-term liabilities $1,960,000 BALANCE SHEET PRESENTATIO
80、N OF LONG-TERM LIABILITIESLong-term liabilities are reported in a separate section of the balance sheet immediately following current liabilities, as shown aboveSummary data may alternatively be presented in the balance sheet with detailed data shown in a supporting scheduleThe current maturities of
81、 long-term debt should be reported under current liabilities if they are to be paid from current assetsANALYSIS OF LONG-TERM LIABILITIESLong-term creditors 长期债权人长期债权人and stockholders股东股东 are interested in a companys long-run solvency particularly its ability to pay interest as it comes due and to re
82、pay the face value of the debt at maturityDebt to total assets and times interest earned are two ratios that provide information about debt-paying ability and long-run solvencyANALYSIS OF LONG-TERM LIABILITIESThe debt to total assets资产负债率资产负债率 ratio measures the percentage of the total assets provid
83、ed by creditorsThe times interest earned获利倍数获利倍数 ratio provides an indication of the companys ability to meet interest payments as they come due$193.4 $507.6 = 38 % ($34.7 + $20.4 + $1.5 ) $1.5 = 37.7 timesInterestExpenseTimes Interest EarnedIncome before Income Taxes and Interest ExpenseTotal DebtT
84、otal AssetsDebt to Total AssetsLands End annual report disclosed total liabilities of $193.4 million, total assets of $507.6 million, interest expense of $1.5 million, income taxes of $20.4 million, and net income of $34.7 million. Kelloggs debt to total assets ratio and times interest earned ratio are shown below: Income before interest and taxIncome before interest and tax (IBIT) Less: interest Income before taxLess: tax Net income So IBIT = Interest + Taxes + Net income Homework E11-1, E11-2, E11-3, E11-4 , E11-7
