Presented below are the financial statements of Kurtzel Company. KURTZEL COMPANY
ID: 2449216 • Letter: P
Question
Presented below are the financial statements of Kurtzel Company.
KURTZEL COMPANY Comparative Balance Sheets December 31
Assets 2014 2013 Cash $ 87,360 $ 49,920 Accounts receivable 49,920 34,944 Inventory 69,888 49,920 Property, plant, and equipment 149,760 194,688 Accumulated depreciation (79,872 ) (59,904 ) Total $277,056 $269,568
Liabilities and Stockholders’ Equity Accounts payable $ 47,424 $ 37,440 Income taxes payable 17,472 19,968 Bonds payable 42,432 82,368 Common stock 44,928 34,944 Retained earnings 124,800 94,848
Total $277,056 $269,568
KURTZEL COMPANY Income Statement For the Year Ended December 31, 2014
Sales revenue $604,032 Cost of goods sold 436,800 Gross profit 167,232 Selling expenses $44,928 Administrative expenses 14,976 59,904 Income from operations 107,328 Interest expense 7,488 Income before income taxes 99,840 Income tax expense 19,968 Net income $ 79,872
Additional data: 1. Depreciation expense was $43,680.
2. Dividends declared and paid were $49,920.
3. During the year equipment was sold for $21,216 cash. This equipment cost $44,928 originally and had accumulated depreciation of $23,712 at the time of sale.
Prepare a statement of cash flows using the indirect method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)
KURTZEL COMPANY Statement of Cash Flows For the Year Ended December 31, 2014
c) Compute these cash-based measures: (Round ratios to 2 decimal places, e.g. 2.56.)
(1) Current cash debt coverage. times
(2) Cash debt coverage. times
(3) Free cash flow.
Explanation / Answer
Cash Flow Statement
Particulars
31.03.2014
A
Cash Flow from Operating Activities:
Net Profit before tax and extraordinary items and Interest
1,07,328
Adjustments for: -
1
Depreciation
43,680
2
Profit on Sale of Investments/Assets
-
Operating Profit before working capital changes
1,51,008
Adjustments for: -
1
Change in Accounts Receivable
(14,976)
2
Change in Inventories
(19,968)
3
Change in Trade Payable & other Current Liabilities
(29,952)
Cash generated from Operations
86,112
1
Interest paid
(7,488)
2
Income Tax paid
(22,464)
Cash flow before Extraordinary Items
56,160
1
Extraordinary items
-
Net Cash from Operating Activities
56,160
B
Cash Flows from Investing Activities:-
1
Sale of Fixed Assets
21,216
Net Cash from Investing activities
21,216
C
Net Cash from Financing Activities:-
1
Proceeds from Equity payable
9,984
2
Dividend Paid
(49,920)
Net Cash from Financing activities
(39,936)
Net Increase in cash & cash equivalents
37,440
Cash & Cash equivalents at beginning of period
49,920
Cash & Cash equivalent at end of period
87,360
current cash debt coverage
net cash provided by operating activities
average current liabilities
=
56160
39936
=
1.41
cash debt coverage
net cash provided by operating activities
total current liabilities
=
56160
102336
=
0.55
Free Cash Flow
Cash from operating activities adjusted with capital expenditure & dividend
=
56160-49920
=
6240
Cash Flow Statement
Particulars
31.03.2014
A
Cash Flow from Operating Activities:
Net Profit before tax and extraordinary items and Interest
1,07,328
Adjustments for: -
1
Depreciation
43,680
2
Profit on Sale of Investments/Assets
-
Operating Profit before working capital changes
1,51,008
Adjustments for: -
1
Change in Accounts Receivable
(14,976)
2
Change in Inventories
(19,968)
3
Change in Trade Payable & other Current Liabilities
(29,952)
Cash generated from Operations
86,112
1
Interest paid
(7,488)
2
Income Tax paid
(22,464)
Cash flow before Extraordinary Items
56,160
1
Extraordinary items
-
Net Cash from Operating Activities
56,160
B
Cash Flows from Investing Activities:-
1
Sale of Fixed Assets
21,216
Net Cash from Investing activities
21,216
C
Net Cash from Financing Activities:-
1
Proceeds from Equity payable
9,984
2
Dividend Paid
(49,920)
Net Cash from Financing activities
(39,936)
Net Increase in cash & cash equivalents
37,440
Cash & Cash equivalents at beginning of period
49,920
Cash & Cash equivalent at end of period
87,360
current cash debt coverage
net cash provided by operating activities
average current liabilities
=
56160
39936
=
1.41
cash debt coverage
net cash provided by operating activities
total current liabilities
=
56160
102336
=
0.55
Free Cash Flow
Cash from operating activities adjusted with capital expenditure & dividend
=
56160-49920
=
6240
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