Depreciation expense totals $200; operating lease payments total $150; and preferred dividends total
The 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)
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.
Required a. Compute the times interest earned.
b. Compute the fixed charge coverage.