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Horngren'S Financial And Managerial Accounting
Found in: Page 615

Short Answer

Question: The income statement for Vermont Communications follows. Assume VermontCommunications signed a 3-month, 3%, $6,000 note on June 1, 2018, and that thiswas the only note payable for the company.

Vermont Communications

Income Statement

Year Ended July 31, 2018

Net Sales Revenue

$ 26,500

Cost of Goods Sold

12,200

Gross Profit

14,300

Operating Expenses:

Selling Expenses

$ 690

Administrative Expenses

1,550

Total Operating Expenses

2,240

Operating Income

12,060

Other Income and (Expenses):

Interest Expense

?

Total Other Income and (Expenses)

?

Net Income before Income Tax Expense

?

Income Tax Expense

2,410

Net Income

$ ?

Requirements

1. Fill in the missing information for Vermont’s year ended July 31, 2018, incomestatement. Round to the nearest dollar.

2. Compute the times-interest-earned ratio for the company. Round to twodecimals.

Net Income:$9,620

Times Interest Earned Ratio:402 times

See the step by step solution

Step by Step Solution

Step1: Completing Income Statement

Vermont Communications

Income Statement

Year Ended July 31, 2018

Net Sales Revenue

$ 26,500

Cost of Goods Sold

12,200

Gross Profit

14,300

Operating Expenses:

Selling Expenses

$ 690

Administrative Expenses

1,550

Total Operating Expenses

2,240

Operating Income

12,060

Other Income and (Expenses):

Interest Expense

30

Total Other Income and (Expenses)

30

Net Income before Income Tax Expense

12,030

Income Tax Expense

2,410

Net Income

$ 9,620

Step 2: Computation of ratio

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