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P4-5B The financial statements of Frank B. Robinson Company

P4-5B The financial statements of Frank B. Robinson Company appear below:

FRANK B. ROBINSON COMPANY
Comparative Balance Sheets
For the Year Ended December 31, 2002

Assets 2002 2001
Cash $29,000 $13,000
Accounts receivable 28,000 14,000
Merchandise inventory 25,000 35,000
Property, plant, and equipment 60,000 78,000
Accumulated depreciation (20,000) (24,000)
Total $122,000 $116,000
Liabilities and Stockholders' Equity
Accounts payable $27,000 $23,000
Income taxes payable 5,000 8,000
Bonds payable 27,000 33,000
Common stock 18,000 14,000
Retained earnings 45,000 38,000
Total $122,000 $116,000

FRANK B. ROBINSON COMPANY
Income Statement
For the Year Ended December 31, 2002
Sales $220,000
Cost of goods sold 180,000
Gross profit 40,000
Selling expenses $14,000 $14,000
Administrative expenses 10,000 24,000 10,000 24,000
Income from operations 16,000 16,000
Interest expense 2,000 2,000
Income before income taxes 14,000 14,000
Income tax expense 4,000 4,000
Net income $ 10,000 $10,000

Additional information:
1. Dividends declared and paid were $3,000.
2. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally
and had a book value of $8,500 at the time of sale.
3. All depreciation expense is in the selling expense category.
4. All sales and purchases are on account.

Instructions
(a) Prepare a statement of cash flows using the indirect method.
(b) Compute the following cash-basis ratios.
(1) Current cash debt coverage ratio.
(2) Cash return on sales ratio.
(3) Cash debt coverage ratio.

Attachments

Solution Preview

For the ratios, I attached a word document so that you have the formula for calculating the ratios.

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Solution Summary

The solution includes an excel sheet of the statement of cash flows for Frank B. Robinson Company as well as calculations of the following ratios:
(1) Current cash debt coverage ratio.
(2) Cash return on sales ratio.
(3) Cash debt coverage ratio.

$2.19