Problem: The comparative balance sheets for Langley Company appear below:
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LANGLEY COMPANY
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Comparative Balance Sheet
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Dec. 31, 2003
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Dec. 31, 2002
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Assets
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Cash
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$27,000
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$12,000
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Accounts receivable
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18,000
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14,000
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Prepaid expenses
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6,000
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9,000
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Inventory
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27,000
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18,000
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Long-term investment in bonds
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0.00
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18,000
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Equipment
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62,000
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30,000
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Accumulated depreciation-equipment
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(20,000)
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(14,000)
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Total assets
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$120,000
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$87,000
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Liabilities and Stockholders' Equity
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Accounts payable
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$19,000
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$9,000
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Bonds payable
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35,000
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43,000
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Common stock
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40,000
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25,000
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Retained earnings
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26,000
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10,000
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Total liabilities and stockholders' equity
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$120,000
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$87,000
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Additional information:
1. Net income for the year ending December 31, 2003 was $40,000.
2. Cash dividends of $24,000 were declared and paid during the year.
3. Long-term investments in bonds that had a book value of $18,000 were sold for $14,000.
4. Sales for 2003 are $120,000.
Instructions:
Question 1. Prepare a statement of cash flows for the year ended December 31, 2003, using the indirect method.
Question 2. Compute the following cash basis ratios:
a. Current cash debt coverage ratio.
b. Cash return on sales ratio.
c. Cash debt coverage ratio.