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Statement of Cash Flows Using an Indirect Method

(See attached file for full problem description)

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

FRANK B. ROBINSON COMPANY
Comparative Balance Sheets
December 31

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
Administrative expenses 10,000 24,000
Income from operations 16,000
Interest expense 2,000
Income before income taxes 14,000
Income tax expense 4,000
Net income $ 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 orginally and had a book value of $8,500.00 at the time of sale.
3. All depreciation expense is in the selling expense category.
4. All sales and purchases are on account.

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Instructions

a. Prepare a statement of cash flows using the indirect method.
b. Compute the following cash-basis ratios.

1. Current cash dept coverage ratio.
2. Cash return on sales ratio.
3. Cash debt coverage ratio.
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Attachments

Solution Preview

(See attached file for full problem description)

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

FRANK B. ROBINSON COMPANY
Comparative Balance Sheets
December 31

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 ...

Solution Summary

This provides the steps to prepare the statement of cash flows using the indirect method

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