Sheehan, inc. provides the following income statement for 2017:

net sales $240,000
cost of goods sold 110,000
gross profit $130,000

operating expenses:
selling expenses 45,000
administrative expenses 12,000
total operating expenses 57,000
operating income $73,000
other revenues and (expenses):

loss on sale of capital assets (27,000)
interest expense (1,000)
total other revenues and (expenses) (28,000)
income before income taxes $45,000
income tax expense 5,300
net income $39,700
calculate the times-interest-earned ratio. (round your answer to two decimal places.)
a. 46.00 times
b. 45.00 times
c. 39.70 times
d.7 3.00 times

Option (A) is correct.

Explanation:

Times-interest-earned ratio refers to the ratio of Earning before interest and taxes to the interest expenses.

Times interest earned ratio:

= Earning before interest and taxes ÷ Interest expenses

= (Income Before Income Taxes + Interest Expense) ÷ Interest expenses

= ($45,000 + $1000) ÷ $1000

= 46 times

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