Presented below are the financial statements of Helwany Company.
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HELWANY COMPANY
Comparative Balance Sheets
December 31
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Assets
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2012
|
2011
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Cash
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$ 35,000
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$ 20,000
|
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Accounts receivable
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20,000
|
14,000
|
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Inventory
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28,000
|
20,000
|
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Property, plant, and equipment
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60,000
|
78,000
|
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Accumulated depreciation
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(32,000)
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(24,000)
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Total
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$111,000
|
$108,000
|
|
|
|
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Liabilities and Stockholders" Equity
|
|
|
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Accounts payable
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$ 19,000
|
$ 15,000
|
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Income taxes payable
|
7,000
|
8,000
|
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Bonds payable
|
17,000
|
33,000
|
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Common stock
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18,000
|
14,000
|
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Retained earnings
|
50,000
|
38,000
|
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Total
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$111,000
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$108,000
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HELWANY COMPANY
Income Statement
For the Year Ended December 31, 2012
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Sales
|
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$242,000
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Cost of goods sold
|
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175,000
|
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Gross profit
|
|
67,000
|
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Selling expenses
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$18,000
|
|
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Administrative expenses
|
6,000
|
24,000
|
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Income from operations
|
|
43,000
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|
Interest expense
|
|
3,000
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Income before income taxes
|
|
40,000
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Income tax expense
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|
8,000
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Net income
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$ 32,000
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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 originally and had accumulated depreciation of $9,500 at the time of sale.
Instructions
(a) Prepare a statement of cash flows using the indirect method.
(b) Compute these cash-based measures:
(1) Current cash debt coverage ratio.
(2) Cash debt coverage ratio.
(3) Free cash flow.