December 31 2017 2016 Prepare a statement of cash flows for 2017 for Culver Corp

Question

December 31

2017

2016

Prepare a statement of cash flows for 2017 for Culver Corporation. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Determine Culver Corporation’s current cash debt coverage, cash debt coverage, and free cash flow. (Round current cash debt coverage and cash debt coverage to 2 decimal places., e.g. 0.67.)

A comparative balance sheet for Culver Corporation is presented below.

December 31

Assets

2017

2016

Cash $ 72,690 $ 22,000 Accounts receivable 83,430 67,740 Inventory 181,430 190,740 Land 72,430 111,740 Equipment 261,430 201,740 Accumulated Depreciation-Equipment (70,430 ) (43,740 )    Total $600,980 $550,220 Liabilities and Stockholders' Equity Accounts payable $ 35,430 $ 48,740 Bonds payable 150,000 200,000 Common stock ($1 par) 214,000 164,000 Retained earnings 201,550 137,480    Total $600,980 $550,220
Additional information:
1. Net income for 2017 was $127,860. No gains or losses were recorded in 2017. 2. Cash dividends of $63,790 were declared and paid. 3. Bonds payable amounting to $50,000 were retired through issuance of common stock.

Explanation / Answer

Cash Flow Statement :-

Current Cash Debt Coverage Ratio :-

= Net Cash by Operating Activities / Average Current Liabilities

= $127860 / $42085

= 3.04 times

Average Current Liabilities = (Opening Current Liabilities + Closing Current Liabilities)/2

= ($48740 + $35430)/2

= $42085

Cash Debt Coverage Ratio :-

= Net Cash from Operating Activities / Average Total Debt

= $127860 / $217085

= 0.59 times

Average Total Debt = (($48740+$200000)+($35430+$150000))/2

= ($248740 + $185430)/2

= $434170 / 2

= $217085

Free Cash Flow :-

= Net Cash from Operating Activities - Capital Expensditure

= $127860 - $59690

= $68170

Particulars Amount($) Amount($) Cash from Operating Activities :- Net Income 127860 Add : Depreciation ($70430 - $43740) 26690 Less : Increase in Accounts Receivable (15690) Add : Decrease in Inventories 9310 Less : Decrease in Accounts Payable (13310) 7000 Net Cash from operating Activities 134860 Cash from Investing Activities :- Purchase of Equipment (59690) Sale of Land 39310 Net Cash from Investing Activities (20380) (20380) Cash from Investing Activities :- Dividend Paid (63790) Net Cash from Financing Activities (63790) (63790) Total Cash Flow 50690 Add : Opening Balance of Cash 22000 Closing Balance of Cash 72690

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