he following information is available from the balance sheets at the ends of the two most recent years and the income statement for the most recent year of Impact Company:

		December 31
		2017		2016
Accounts payable		$ 65,000		$ 50,000
Accrued liabilities		25,000		35,000
Taxes payable		60,000		45,000
Short-term notes payable		0		75,000
Bonds payable due within next year		200,000		200,000
Total current liabilities		$ 350,000		$ 405,000
Bonds payable		$ 600,000		$ 800,000
Common stock, $10 par		$1,000,000		$1,000,000
Retained earnings		650,000		500,000
Total stockholders’ equity		$1,650,000		$1,500,000
Total liabilities and stockholders’ equity		$2,600,000		$2,705,000

		2017
Sales revenue		$1,600,000
Cost of goods sold		950,000
Gross profit		$ 650,000
Selling and administrative expense		300,000
Operating income		$ 350,000
Interest expense		89,000
Income before tax		$ 261,000
Income tax expense		111,000
Net income		$ 150,000

Other Information:

1. Short-term notes payable represents a 12-month loan that matured in November 2017. Interest of 12% was paid at maturity.
2. One million dollars of serial bonds had been issued ten years earlier. The first series of $200,000 matured at the end of 2017, with interest of 8% payable annually.
3. Cash flow from operations was $185,000 in 2017. The amounts of interest and taxes paid during 2017 were $89,000 and $96,000, respectively.

Required:

1. Compute the following for Impact Company. Round your answers to two decimal places.

		to 1
c. The debt service coverage ratio for 2017

Answer rating: 100% (QA)

The Debt Service Coverage Ratio DSCR for Impact Company in 2017 can be calcul... View the full answer