Problems P 7-2.

Jones Petro Company reports the

following consolidated statement of income:...

Problems

P 7-2. Jones Petro Company reports the following consolidated statement of income:

Operating revenues
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Problems

P 7-2. Jones Petro Company reports the following consolidated statement of income:

Operating revenues
$2,989

Costs and expenses:

Cost of rentals and

royalties 543

Cost of sales
314

Selling, service, administrative, and general

expense 1,424

Total costs and

expenses
2,281

Operating income
708

Other income
27

Other deductions (interest)

1/5
 60

Income before income

taxes 675

Income taxes 309

Income before outside shareholders’ interests 366

Outside shareholders’ interests 66

Net income $
300

Note: Depreciation expense totals $200; operating lease payments total $150; and preferred
dividends total $50. Assume that 1/3 of operating lease payments is for interest.

Require a. Compute the times interest earned.

d
b. Compute the fixed charge coverage.

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 c.

P 7-3. Sherwill’s statement of consolidated income is as follows:

Net sales $65

8

Other income 8

666

Costs and expenses:

Cost of products sold 418

Selling, general, and administrative expenses 196

Interest 16
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 630

Income before income taxes and extraordinary charges 36

Income taxes 18

Income before extraordinary charge 18

Extraordinary charge—losses on tornado damage (net) 4

Net income $
14

Note: Depreciation expense totals $200; operating lease payments total $150; and preferred
dividends total $50. Assume that 1/3 of operating lease payments is for interest.

Required a. Compute the times interest earned.

b. Compute the fixed charge coverage.

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