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# Statement of Cash Flows Using an Indirect Method

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(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
Income from operations 16,000
Interest expense 2,000
Income before income taxes 14,000
Income tax expense 4,000
Net income \$ 10,000
_______
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.

Page 2

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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#### 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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