Presented below are the financial statements of Helwany Company.
| HELWANY COMPANY | ||
| Assets | 2012 | 2011 |
| Cash | $ 35,000 | $ 20,000 |
| Accounts receivable | 20,000 | 14,000 |
| Inventory | 28,000 | 20,000 |
| Property, plant, and equipment | 60,000 | 78,000 |
| Accumulated depreciation | (32,000) | (24,000) |
| Total | $111,000 | $108,000 |
| Liabilities and Stockholders” Equity | ||
| Accounts payable | $ 19,000 | $ 15,000 |
| Income taxes payable | 7,000 | 8,000 |
| Bonds payable | 17,000 | 33,000 |
| Common stock | 18,000 | 14,000 |
| Retained earnings | 50,000 | 38,000 |
| Total | $111,000 | $108,000 |
| HELWANY COMPANY | ||
| Sales | $242,000 | |
| Cost of goods sold | 175,000 | |
| Gross profit | 67,000 | |
| Selling expenses | $18,000 | |
| Administrative expenses | 6,000 | 24,000 |
| Income from operations | 43,000 | |
| Interest expense | 3,000 | |
| Income before income taxes | 40,000 | |
| Income tax expense | 8,000 | |
| Net income | $ 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 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.
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