Shown on page 651 are the financial statements of Rivera Company.

Additional data:
1. Dividends of $25,000 were declared and paid.
2. During the year equipment was sold for $10,000 cash. This equipment cost $13,000 originally and had a book value of $10,000 at the time of sale.
3. All depreciation expense, $6,000, is in the selling expense category.
4. All sales and purchases are on account.
5. Additional equipment was purchased for $8,000 cash.
Instructions
(a) Prepare a statement of cash flows using the indirect method.
(b) Compute these cash-basis measures:
(1) Current cash debt coverage ratio.
(2) Cash debt coverage ratio.
(3) Free cashflow.

Transcribed Image Text:

RIVERA COMPANY Comparative Balance Sheets December 31 Assets Cash Accounts receivable Merchandise inventory Property, plant, and equipment 73,000 Less: Accumulated depreciation Total 2010 2009 25,000 23,000 41,000 S 33,000 14,000 25,000 78,000 46,000 (24,000) 54,000 S126,000 (27,000) $135,000 Liabilities and Stockholders' Equit Accounts payable Income taxes payable Bonds payable Common stock Retained carnings Total 23,000 26,000 20,000 25,000 41,000 $135,000 43,000 20,000 10,000 25,000 28,000 S126,000 RIVERA COMPANY Income Statement For the Year Ended December 31, 2010 Sales Cost of goods sold Gross profit Seling expenses Administrative expenses Income from operations Interest expensc Income before income taxes Incomc tax expense Net income $286,000 194,000 92,000 $28,000 9,000 37,000 55,000 7,000 48,000 10,000 S 38,000