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# Statement of Cash Flows, Indirect Method, and Ratio Computation

See attached file.

LANGLEY COMPANY
Comparative Balance Sheet
Dec. 31, 2003 Dec. 31, 2002
Assets
Cash \$27,000 \$12,000
Accounts receivable 18,000 14,000
Prepaid expenses 6,000 9,000
Inventory 27,000 18,000
Long-term investment in bonds 0.00 18,000
Equipment 62,000 30,000
Accumulated depreciation-equipment (20,000) (14,000)
Total assets \$120,000 \$87,000

Liabilities and Stockholders' Equity
Accounts payable \$19,000 \$9,000
Bonds payable 35,000 43,000
Common stock 40,000 25,000
Retained earnings 26,000 10,000
Total liabilities and stockholders' equity \$120,000 \$87,000

1. Net income for the year ending December 31, 2003 was \$40,000.
2. Cash dividends of \$24,000 were declared and paid during the year.
3. Long-term investments in bonds that had a book value of \$18,000 were sold for \$14,000.
4. Sales for 2003 are \$120,000.

Instructions

1. Prepare a statement of cash flows for the year ended December 31, 2003, using the indirect method.
2. Compute the following cash basis ratios:
a. Current cash debt coverage ratio.
b. Cash return on sales ratio.
c. Cash debt coverage ratio.

#### Solution Summary

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