CHAPTER 7LONG-TERM DEBT-PAYING ABILITY7-1 2011 Cengage Learning. All Rights Reserved. This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part.CHAPTER 7LONG-TERM DEBT-PAYING ABILITYMULTIPLE CHOICE1.Jones Company has long-term debt of $1,000,000, while Smith Company, Jones' competitor, has long-term debt of $200,000. Which of the following statements best represents an analysis of the long-term debt position of these two firms?a.Smith Company's times interest earned should be lower than Jones.b.Jones obviously has too much debt when compared to its competitor.c.Jones should sell more stock and use less debt.d.Smith has five times better long-term borrowing ability than Jones.e.Not enough information to determine if any of the answers are correct.ANS:E2.Ingram Dog Kennels had the following financial statistics for 2010:Long-term debt$400,000(average rate of interest is 8%)Interest expense35,000Net income48,000Income tax46,000Operating income107,000What is the times interest earned for 2010?a.11.4 timesb.3.3 timesc.3.1 timesd.3.7 timese.none of the answers are correctANS:D3.A times interest earned ratio of 0.90 to 1 means:a.that the firm will default on its interest paymentb.that net income is less than the interest expensec.that the cash flow is less than the net incomed.that the cash flow exceeds the net incomee.none of the answers are correctANS:B4.Which of the following will not cause times interest earned to drop? Assume no other changes than those listed.a.An increase in bonds payable with no change in operating income.b.An increase in interest rates.c.A rise in preferred stock dividends.d.A rise in cost of goods sold with no change in interest expense.e.A drop in sales with no change in interest expense.ANS:C5.A times interest earned ratio indicates that:a.preferred stock has no maturity dateb.the debt will never become duec.the firm will be able to repay the principal when dued.the principal can be refinancede.none of the answers are correctANS:E6.Jordan Manufacturing reports the following capital structure:Current liabilities$100,000Long-term debt400,000Deferred income taxes10,000Preferred stock80,000Common stock100,000Premium on common stock180,000Retained earnings170,000What is the debt ratio?a.0.48b.0.49c.0.93d.0.96e.none of the answers are correctANS:B7.The debt ratio indicates:a.the ability of the firm to pay its current obligationsb.the efficiency of the use of total assetsc.the magnification of earnings caused by leveraged.a comparison of liabilities with total assetse.none of the answers are correctANS:D8.Joseph and John, Inc., had the following balance sheet results for 2010:(in millions)Current liabilities$12.6Bonds payable18.6Lease obligations2.7Minority interest1.4Common stock8.6Retained earnings22.9$66.8Compute the debt-equity ratio.a.112.1%b.87.6%c.67.6%d.46.7%e.none of the answers are correctANS:A9.Which of the following statements best compares long-term borrowing capacity ratios?a.The debt/equity ratio is more conservative than the debt ratio.b.The debt ratio is more conservative than the debt/equity ratio.c.The debt/equity ratio is more conservative than the debt to tangible net worth ratio.d.The debt to tangible net worth ratio is more conservative than the debt/equity ratio.e.The debt ratio is more conservative than the debt to tangible net worth ratio.ANS:D10.In computing debt to tangible net worth, which of the following is not subtracted in the denominator?a.Copyrightsb.Goodwillc.Patentsd.Investmentse.TrademarksANS:D11.A fixed charge coverage:a.is a balance sheet indication of debt carrying abilityb.is an income statement indication of debt carrying abilityc.is a liquidity ratiod.frequently includes research and developmente.computation is standard from firm to firmANS:B12.The following financial statement data are taken from Xeron Company's 2010 annual report:(in millions)Current assets$12.6Investments9.4Intangibles6.8Tangible assets (net)58.1Current liabilities6.4Long-term debt39.7Stockholders' equity40.8Compute the debt ratio.a.196.9%b.113.0%c.53.0%d.45.7%e.none of the answers are correctANS:C13.The following financial statement data are taken from Xeron Company's 2010 annual report: (in millions)Current assets$12.6Investments9.4Intangibles6.8Tangible assets (net)58.1Current liabilities6.4Long-term debt39.7Stockholders' equity40.8Compute the debt to tangible net worth ratio.a.146.8%b.135.6%c.53.0%d.45.7%e.none of the answers are correctANS:B14.If a firm has substantial capital or financing leases disclosed in the notes but not capitalized in the financial statements, then:a.the times interest earned ratio will be overstated, based upon the financial statementsb.the fixed charge ratio will be overstated, based upon the financial statementsc.the debt ratio will be understatedd.the working capital will be understatede.none of the answers are correctANS:C15.Under the Employee Retirement Income Security Act, a company can be liable for its pension plan up to:a.30 percent of its total assetsb.30 percent of its net worthc.40 percent of its total assetsd.40 percent of its net worthe.50 percent of its total assetsANS:B16.Included in the Employee Retirement Income Security Act are the following:a.provisions requiring minimum funding of pension plansb.minimum rights to employees upon termination of their employmentc.creation of the Pension Benefit Guaranty Corporationd.provisions requiring minimum funding of pension plans and minimum rights to employees upon termination of their employmente.provisions requiring minimum funding of pension plans, minimum rights to employees upon termination of their employment, and creation of the Pension Benefit Guaranty CorporationANS:E17.What significant improvement in the financial reporting of pensions have pension accounting rules provided?a.determination of the expense for the income statementb.limited balance sheet recognition of pension liabilitiesc.improved disclosured.determination of the expense for the income statement and limited balance sheet recognition of pension liabilitiese.determination of the expense for the income statement, limited balance sheet recognition of pension liabilities, and improved disclosureANS:E18.There are a number of assumptions about future events that must be made regarding a defined benefit plan. An assumption that does not need to be made is:a.interest ratesb.employee turnoverc.mortality ratesd.compensatione.how long the firm will continueANS:E19.Which of the following statements is not correct?a.A ratio that indicates a firm's long-term, debt-paying ability from the income statement view is the times interest earned.b.Some of the items on the income statement that are excluded in order to compute times interest earned are interest expense, income taxes, and unusual or infrequent items.c.Capitalized interest should be included with interest expense when computing times interest earned.d.Usually, the highest times interest coverage in the most recent five-year period is used as the primary indication of the interest coverage.e.In the short run, a firm can often meet its interest obligations, even when the times interest earned is less than 1.00.ANS:D20.Which of these items represents a definite commitment to pay out funds in the future?a.bonds payableb.reserves for rebuilding furnacesc.deferred taxesd.minority shareholders' interestse.redeemable preferred stockANS:A21.Which of the following statements is not true relating to a capitalized (capital) lease?a.A capital lease is handled as if the lessee bought the asset.b.The leased asset is in the fixed assets and the related obligation is included in liabilities.c.On the balance sheet, the capitalized asset amount will not usually agree with the capitalized liability amount because the liability is reduced by payments, and the asset is reduced by depreciation taken.d.Usually, a company depreciates capitalized leases faster than payments are made.e.On the balance sheet, the capitalized asset amount will usually be higher than the capitalized liability amount.ANS:E22.Which of the following statements is not true relating to a defined contribution pension plan?a.A defined contribution plan defines the contributions of the company to the pension plan.b.Once the defined contribution is paid, the company has no further obligation to the pension plan.c.This type of plan shifts the risk to the employee as to whether the pension plan will grow to provide for a reasonable pension payment upon retirement.d.There is no problem estimating the company's pension expense.e.This type of plan presents substantial problems in estimating the pension liability.ANS:E23.A number of assumptions about future events must be made regarding a defined benefit plan. Which of the following does not represent one of the assumptions?a.interest ratesb.termination date for the firmc.employee turnoverd.mortality ratese.compensationANS:BTRUE/FALSE1.When analyzing a firm's long-term, debt-paying ability, we only want to determine the firm's ability to pay the principal.ANS:F2.In general, the profitability of a firm is not considered to be important in determining the short-term, debt-paying ability of the firm.ANS:T3.A good times interest earned record would be indicated by a relatively high, stable coverage for the times interest earned coverage.ANS:T4.Minority shareholders' interest in earnings of subsidiaries are included in earnings for the times interest earned coverage.ANS:T5.Equity earnings are excluded from earnings for the times interest earned coverage.ANS:T6.Capitalized interest should not be considered as part of interest in the times interest earned computation.ANS:F7.To get a better indication of a firm's ability to cover interest payments in the long run, the noncash charges for depreciation, depletion, and amortization can be added back to the times interest earned ratio.ANS:F8.When a portion of operating lease payments is included in fixed charges, it is an effort to recognize the true total interest that the firm is paying.ANS:T9.Under generally accepted accounting principles, an item must clearly represent a commitment to pay out funds in the future in order to be classified as a liability.ANS:T10.When a firm is expensing an item faster on the tax return than on the financial statements, a deferred tax liability is the result.ANS:T11.As with the debt ratio and the debt/equity ratio, from a long-term, debt-paying ability view, the lower the debt to tangible net worth ratio, the better.ANS:T12.The debt to tangible net worth ratio is a more conservative ratio than the debt ratio.ANS:T13.A joint venture can add significant potential liabilities to the parent company that are not on the face of the balance sheet.ANS:T14.A potential significant liability is possible if the company withdraws from a multi-employer pension plan.ANS:T15.A defined benefit plan shifts the risk to the employee as to whether the pension funds will grow to provide for a reasonable pension payment upon retirement.ANS:F16.If an employee is in the pension plan, rights under this plan will be lost if the employee leaves the firm prior to receiving a vested interest.ANS:T17.The balance sheet pension liability considers the projected benefit obligation.ANS:F18.Some companies achieve benefits by hundreds of millions of dollars by a pension termination.ANS:T19.Times interest earned indicates a firm's long-term, debt-paying ability from the balance sheet view.ANS:F20.Capitalization of interest results in interest being added to a fixed asset instead of expensed.ANS:T21.In the short run, a firm can often meet its interest obligations even when the times interest earned is less than 1.00.ANS:T22.The tax expense for the financial statements often agrees with the taxes payable.ANS:F23.Some revenue and expense items never go on the tax return, but do go on the income statement.ANS:T24.Repayment of a long-term bank loan would decrease the debt ratio.ANS:T25.Increases of profits by cutting the cost of sales would increase the times interest earned.ANS:TPROBLEMS1.Laura Bella Company reports the following statement of income:Operating Revenues$4,800Costs and Expenses:Cost of Sales(2,000)Selling, Service, Administrative, and General Expense(1,500)Income Before Interest Expense and Income Taxes$1,300Interest Expense (180)Income Before Income Taxes$1,120Income Taxes (350)Net Income$ 770Note: Depreciation expense totals $300; preferred dividends total $60; operating lease payments total $180. Assume that 1/3 of operating lease payments is for interest.Required:a.Compute the times interest earned.b.Compute the fixed charge coverage.ANS:a.Recurring Earnings BeforeInterest Expense, Tax,Times Interest Earned =Minority Income and Equity EarningsInterest Expense, IncludingCapitalized InterestIncome before income taxes$1,120Plus interest 180Adjusted income$1,300 (A)Interest expense$ 180 (B)(A) $1,300/(B) $180 = 7.22 timesb.Recurring Earnings Before InterestExpense, Tax, Minority Incomeand Equity Earnings Fixed Charge Coverage =+ Interest Portion of RentalsInterest Expense, IncludingCapitalized Interest + InterestPortion of RentalsIncome before income taxes$1,120Plus interest180Adjusted income$1,3001/3 of operating lease payments(1/3 $180)60$1,360Interest expense$1801/3 of operating lease payments 60$240Fixed charge coverage =$1,360= 5.67 times$2402.The following information is computed from Fast Food Chains annual report for 2010. 20102009Current assets$2,731,020$2,364,916Property and equipment, net10,960,2868,516,833Intangible assets, at costless applicable amortization 294,775 255,919$13,986,081$11,137,668Current liabilities$3,168,123$2,210,735Deferred federal income taxes160,00026,000Mortgage note payable456,000Stockholders' equity 10,201,958 8,900,933$13,986,081$11,137,668Net sales$33,410,599$25,804,285Cost of goods sold(30,168,715)(23,159,745)Selling and administrative expense(2,000,000)(1,500,000)Interest expense(216,936)(39,456)Income tax expense (400,000) (300,000)Net income$624,948$805,084Note:One-third of the operating lease rental charge was $100,000 in 2010 and $50,000 in 2009. Capitalized interest totaled $30,000 in 2010 and $20,000 in 2009.Required:a.Based on the above data for both years, compute:1.times interest earned2.fixed charge3.debt ratio4.debt/equity ratio5.debt to tangible net worthb.Comment on the firm's long-term borrowing ability based on the analysis.ANS:a.1.Recurring Earnings BeforeInterest Expense, Tax, MinorityIncome and Equity EarningsTimes Interest Earned =Interest Expense, IncludingCapitalized Interest 20102009Net Sales $ 33,410,599 $25,804,285Less Cost of Goods Sold (30,168,715) 23,159,745)Selling and Administrative (2,000,000) (1,500,000) (A)$ 1,241,884$ 1,144,540Interest Expense $ 216,936 $ 39,456Capitalized Interest 30,000 20,000Total Interest (B)$ 246,936$ 59,456(A)/(B)5.03 times19.25 timesRecurring Earnings BeforeInterest Expense, Tax, MinorityEarnings, Equity Earnings, Plus2.Fixed Charge Interest =Interest Portion of RentalsInterest Expense, IncludingCapitalized Interest, PlusInterest Portion of Rentals20102009From Part (1)$1,241,884$1,144,540Interest Portion of Rentals 100,000 50,000(A)$1,341,884$1,194,540From Part (1)$ 246,936$ 59,456Interest Portion of Rentals 100,00050,000(B)$346,936$ 109,456(A)/(B) 3.87 times 10.91 times3.Debt Ratio = Total LiabilitiesTotal Assets$3,784,123 $2,236,735 $13,986,081$11,137,66827.1%20.1%4. Debt/Equity Ratio =Total LiabilitiesStockholders' Equity$3,784,123$2,236,735$10,201,9588,900,93337.1%25.1%5. Debt to Tangible Net Worth =Total LiabilitiesStockholders' Equity - Intangibles$3,784,123= 38.2%$2,236,735= 25.9%$10,201,958 - $294,775$8,900,933 - $255,919b.In 2010, this firm had a substantial rise in debt. This included current liabilities, deferred taxes, and a new mortgage note payable. This increased debt and the related increased interest expense caused a decline in interest coverage and a rise in the debt, debt/equity, and debt to tangible net worth ratios. In addition, operating lease rental charges went up, which lowered the fixed charge coverage.3.The following financial information is excerpted from the 2010 annual report of Retail Products, Inc.Balance Sheet(in thousands)20102009Current assets$ 449,195$ 433,049Investments32,82255,072Deferred charges4,90512,769Property, plant, and equipment, net350,921403,128Trademarks and leaseholds45,03147,004Excess of cost over fair marketvalue of net assets acquired272,146276,639Assets held for disposal 6,062 10,247 $1,161,082$1,237,908Total liabilities$ 689,535$ 721,149Total stockholders' equity 471,547 516,759 $1,161,082$1,237,908Income StatementNet sales$2,020,526$1,841,738Cost of goods sold(2,018,436)(1,787,126)Selling and administrative(300,000)(250,000)Interest expense (40,000) (30,000)Net income (loss) $(337,910)$(225,388)Required:For each year compute:a.1.Times interest earned2.Debt ratio3.Debt/equity ratio4.Debt to tangible net worth ratiob.Comment on the results.c.Does a times interest earned ratio of less than 1 to 1 mean that the firm cannot pay its interest expense?ANS:a.Recurring Earnings BeforeInterest, Tax, Minority Income1.Times Interest Earned =and Equity EarningsInterest Expense, IncludingCapitalized Interest2010$2,020,526 - $2,018,436 - $300,000$40,000Negative 7.45 Times2009$1,841,738 - $1,787,126 - $250,000$30,000Negative 6.51 Times2.Debt Ratio = Total LiabilitiesTotal Assets 2010 2009$689,535$721,149$1,161,082$1,237,90859.4%58.3%3.Debt/Equity Ratio =Total LiabilitiesTotal Stockholders' Equity 2010 2009$689,535$721,149$471,547$516,759146.2%139.6%4.Debt to Tangible =Total LiabilitiesNet worth RatioTotal Stockholders' Equity - Intangible Assets2010$689,535 = 446.7%$471,547 - $45,031 - $272,1462009$721,149 = 373.4%$516,759 - $47,004 - $276,639b.This firm has had a rise in the debt, debt/equity, and debt to tangible net worth ratios. The debt to tangible net worth is especially high due to the high amount of excess of cost over fair market value of net assets.The times interest earned figure dropped from a negative 6.51 times in 2009 to a negative 7.45 times in 2010.This firm's long-term borrowing ability appears to be very negative and deteriorated further in 2010.c.No, a times interest earned ratio of less than 1 to 1 does not mean, in the short run, that the firm cannot meet its interest payments. Some of the expenses, such as depreciation, do not require current funds, but they do reduce the interest coverage. Also, in the short run, the outlay can come from sources of funds other than income.4.Mr. Jones has asked you to advise him of the long-term debt position of Dryden Corporation. He provides you with the ratios indicated below.200820092010Fixed Charge Coverage6.34.55.0Times Interest Earned8.26.05.3Debt Ratio40%39%40%Debt to Tangible Net Worth80%81%84%Required:Give the implications and limitations of each item separately and then the collective inference one may draw about Dryden's long-term, debt-paying ability.ANS:Times interest earned has declined. This can be caused by lower income, higher debt, or a combination of both.Fixed charge coverage has declined. The decline for this ratio has been less than the decline in the times interest earned. This indicates that the use of noncapitalized leases has declined.The debt ratio is relatively stable.The debt to tangible net worth ratio has increased slightly. This can be caused by higher debt, lower equity, or higher intangibles.Since the debt ratio is relatively constant, the problem doesnot appear to be higher debt. Rather, higher interest rates or lower income appear to be the problem. Since the debt ratio is constant, the most logical explanation for the rise in debt to tangible net worth is a rise in intangibles, which lowers the denominator.The long-term debt position has declined, but we need more information about the company and industry in order to come to a conclusion on the long-term debt position.5.Amsterdam Antiques reported the following comparative income figures in 2010.(in thousands)20102009Net sales$701$646Other income 10 8$711$654Costs and expenses:Cost of goods sold$472$408Selling and general expenses176156Interest 28 22$676$586Income before income taxes and extraordinary items$ 35$ 68Income taxes(15)(30)Income before extraordinary items$ 20$ 38Extraordinary itemslosses from fire 18Net income$ 20$ 20Your boss, the president of Amsterdam bank, is concerned about Amsterdam's borrowing capacity. A representative of Amsterdam Antiques feels that there should be no problem, since net income are the same with slightly higher sales.Required:Compute times interest earned and comment on the bank's position.ANS:Recurring Earnings BeforeInterest, Tax, MinorityTimes Interest Earned =Income and Equity EarningsInterest Expense, IncludingCapitalized Interest20102009Income before income taxes and extraordinary items$ 35$ 68Plus interest expense 2822(a)$ 63$ 90(b) Interest expense$ 28$ 22(a) (b)2.25 times4.09 timesThe ability of the firm to cover its interest has declined substantially due both to rising interest and falling income.The statement by the Amsterdam Antiques representative is false. The only reason that net income was at $20,000 in 2009 was because of the extraordinary fire loss. Recurring profits dropped from $38,000 to $20,000.6.Required:Following is a list of paired ratios and transactions. For each transaction, indicate the effect of that transaction on the specific ratio. Use + for increase, - for decrease, and 0 for no effect.TransactionRatioa.A firm is required to capitalize leases previously presented only in notes.Debt Ratio of 0.4b.A firm sells its own common stock.Debt/Equity Ratio of 1.12c.A firm has an increase in selling expense with no change in other expenses.Times Interest Earned Ratio of 6.2 to 1d.A firm writes off a sizeable account receivable.Times Interest Earned Ratio of 3.6 to 1e.A firm pays cash for a valuable patent.Debt to Tangible Net Worth Ratio of 1.3 to 1ANS:a.+b.-c.-d.0e.+7.Aristocrats Art reported the following trend analysis to its bank as an attachment to a loan application.201020092008Fixed Charge Ratio4.002.501.54Times Interest Earned Ratio4.943.172.08Debt Ratio0.470.510.56Debt to Tangible Net Worth Ratio0.911.061.36You have been asked to evaluate the long-term borrowing capacity. You know that a rule of thumb for this industry for the debt/ equity ratio is 1 to 1.Required:a.Compute the debt/equity ratio for 2010, 2009, and 2008, using the debt ratio as a guide.b.Comment on the long-term borrowing ability of this firm.ANS:a.If total liabilities are .47 of total assets, then total stockholders' equity must be .53, since total liabilities plus total stockholders' equity = total assets.Debt=0.47= .89 (2010)Equity0.530.51= 1.04 (2009)0.490.56= 1.27 (2008)0.44b.This firm shows evidence of an improved, long-term borrowing capacity position. The times interest earned ratio and the fixed charge ratio has improved, as has the debt ratio, debt to tangible net worth ratio, and debt/equity ratio. The debt/equity ratio is now below the industry average.8.You have been asked to evaluate the long-term borrowing position of Client, Inc. However, you were given only the following limited information.Bonds payable, 12%$1,000,000Stockholders' equity1,800,000Current assets1,870,000Tangible assets, net1,600,000Intangible assets40,000Investments120,000Other assets90,000Sales4,000,000Operating expenses3,620,000Required:Assuming that this is the only information you will receive, estimate the following ratios:a.Times interest earned ratiob.Debt ratioc.Debt/equity ratiod.Debt to tangible net worth ratioANS:Computations for figures needed in the ratios follow.Total assets:Current assets$1,870,000Tangible assets1,600,000Intangible assets40,000Investments120,000Other assets 90,000Total assets$3,720,000Liabilities:Total assets$3,720,000Less stockholders' equity 1,800,000Total liabilities$1,920,000Interest:$1,000,000 0.12 = $120,000Recurring Earnings BeforeInterest, Tax Minority Incomea.Times Interest Earned Ratio=and Equity EarningsInterest Expense, IncludingCapitalized Interest= $4,000,000 - $3,620,000= 3.17$120,000timesb.Debt Ratio=Total LiabilitiesTotal Assets=$1,920,000= 51.6%$3,720,000c.Debt/Equity Ratio=Total LiabilitiesShareholder' Equity=$1,920,000= 106.7%$1,800,000d.Debt to Tangible=Total LiabilitiesNet Worth RatioShareholders' Equity - Intangible Assets=$1,920,000= 109.1%$1,800,000 - $40,0009.Required:Indicate the effect of each of the following transactions on the ratios listed. Use + to indicate an increase, - to indicate a decrease, and 0 to indicate no effect. Assume an initial times interest earned ratio of 3 to 1, debt ratio of 0.5 to 1, debt/equity ratio of 1.0 to 1, and total debt to tangible net worth ratio of 1.1 to 1.TimesDebtTotal DebtInterestDebtEquityTangible NetTransactionEarned RatioRatioRatioWorth Ratioa.Collection of accounts receivable.b.Firm has decreasing profits due to rising cost of sales.c.Firm appropriates a substantial amount for expansion.d.Conversion of preferred stock to common.e.Repayment of a short-term bank loan (ignore interest).f.Payment for a valuable trademark.g.The stock is split two for one.h.Purchase of equipment financed by a long-term note (consider interest).i.Conversion of bonds to stock.j.Declaration and payment of dividend.k.The firm experiences a rise in the rate charged on its line of credit.ANS:TimesDebtTotal DebtInterestDebtEquityTangible NetTransactionEarned RatioRatioRatioWorth Ratioa.Collection of accounts receivable.0000b.Firm has decreasing profits due to rising cost of sales.----c.Firm appropriates a substantial amount for expansion.0000d.Conversion of preferred stock to common.0000e.Repayment of a short-term bank loan (ignore interest).0---f.Payment for a valuable trademark.000+g.The stock is split two for one.0000h.Purchase of equipment financed by a long-term note (consider interest).-+++i.Conversion of bonds to stock.+---j.Declaration and payment of dividend.0+++k.The firm experiences a rise in the rate charged on its line of credit.-+++10.Listed below are several ratios.a.times interest earnedb.fixed charge coveragec.debt ratiod.debt/equity ratioe.debt to tangible net worthRequired:Match the letter that goes with each formula._____ 1.Total LiabilitiesShareholders' Equity - Intangible Assets_____ 2.Total LiabilitiesTotal AssetsRecurring Earnings, ExcludingInterest Expense, Tax Expense,_____ 3.Equity Earnings, and Minority ExpenseInterest Expense, IncludingCapitalized InterestRecurring Earnings, ExcludingInterest Expense, Tax Expense,Equity Earnings, and Minority Earnings_____ 4.+ Interest Portion of RentalsInterest Expense, includingCapitalized Interest + InterestPortion of Rentals_____ 5.Total LiabilitiesShareholders' EquityANS:1.e2.c3.a4.b5.d