Instructions A. prepare a statement of cashflows using indirect meathod B.Comput
ID: 2369925 • Letter: I
Question
Instructions
A. prepare a statement of cashflows using indirect meathod
B.Compute these cash-based measures
1. current cash debt coverage ratio
2. cash debt coverage ratio
3. free cash flow
Comparative Balance Sheet
Assets
Cash for 2011 was $20,000 for 2012 was $35,000
Accounts Receivable for 2011 was 14,000 for 2012 was 20,000
Inventory for 2011 was 20,000 for 2012 was 28,000
Property,Plant,and Equipment for 2011 was 78,000 for 2012 was 60,000
Accumlated Depreciation for 2011 was (24,000) for 2012 was (32,000)
Total for 2011 was $108,000 Total for 2012 was $111,000
Liabilities and Stockholders Equity
Accounts Payable for 2011 was &15,000 for 2012 was $19,000
Income Tax Payable for 2011 was 8,000 for 2012 was 7,000
Bonds Payable for 2011 was 33,000 for 2012 was 17,000
Common Stock for 2011 was 14,000 for 2012 was 18,000
Retained earnings for 2011 was 38,000 for 2012 was 50,000
Total for 2011 was $108,000 Total for 2012 was $111,000
Income Statement
For The Year Ended 12/31/2012
Sales was $242,000
Cost of goods sold was 175,000
Gross profit was 67,000
selling expenses was $18,000
Adminstrative expenses 6,000 Total for Both is 24,000
income from operations was 43,000
intrest expense was 3,000
income before income taxes was 40,000
income tax expense was 8,000
net income was $32,000
Additional Data:
1. depreciation expense was $17,500
2. dividends declared and paid were $20,000
3. during the year equipment was sold for $8,500 cash. This equipment cost $18,000 orginally and had accumlated depreciation of $9,500 at the time of sale.
Explanation / Answer
statement of cash flows
Cash flow from operating activities
Net income ............................................................. 32000
Adjustments to reconcile net income
to net cash providing by operating activities
depriciation expense ............ ...........17500
increase in accounts payable .............. 4000
decrease in income tax payable ............ 1000
increase in merchnadise inventory......... 8000
increase in accounts recievable ...............6000 ..... 8500
net cash provided by operating activities......................21500
cash flow from investing activities
.....sale of equipment .............................. ....................8500
cah flow from financcing activities
........issuance of common stock ...............4000
.....redemption of bonds..............................16000
.....payment of dividends ...........................20000
net cash used in financing activities............................22000
net increase in cash....................................15000
cash at begining of period ...........................20000
cash at end of period ....................................35000
b)
1)current cash debt coverage ratio = 21500 / (23000 + 26000)/2 =0.88 times
2) 21500 / (56000+43000)/2 =0.43 times
3)21500-0-20000 =1500