1. Use the following information from separate companies a through f to compute times interest earned. Which company indicates the strongest ability to pay interest expense as it comes due?
|
|
Net Income (Loss) |
Interest Expense |
Income Taxes |
|
a. |
$140,000 |
$48,000 |
$ 35,000 |
|
b. |
140,000 |
15,000 |
50,000 |
|
c. |
140,000 |
8,000 |
70,000 |
|
d. |
265,000 |
12,000 |
130,000 |
|
e. |
79,000 |
12,000 |
30,000 |
|
f. |
(4,000) |
12,000 |
0 |
2. Tony Newbern, an unmarried employee, works 48 hours in the week ended January 12. His pay rate is $12 per hour, and his wages are subject to no deductions other than FICA — Social Security, FICA — Medicare, and federal income taxes. He claims two withholding allowances. Compute his regular pay, overtime pay (for this company, workers earn 150% of their regular rate for hours in excess of 40 per week), and gross pay. Then compute his FICA tax deduction (use 6.2% for the Social Security portion and 1.45% for the Medicare portion), income tax deduction (use the wage bracket withholding table of Exhibit 11A.6), total deductions, and net pay. (Round tax amounts to the nearest cent.)