These are the financial statements of Patrick Swayze Company:

The following additional data were provided:
1. Dividends declared and paid were \(\$ 5,000\).
2. During the year equipment was sold for \(\$ 8,500\) cash. This equipment cost \(\$ 18,000\) originally and had a book value of \(\$ 8,500\) at the time of sale.
3. All depreciation expense is in the selling expense category.
4. All sales and purchases are on account.
\section*{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 return on sales ratio (3) Cash debt coverage ratio (4) Free cash flow

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PATRICK SWAYZE COMPANY Comparative Balance Sheet December 31 Assets Cash Accounts receivable Merchandise inventory Property, plant, and equipment Accumulated depreciation Total Liabilities and Stockholders' Equity Accounts payable Income taxes payable Bonds payable Common stock Retained earnings Total 1998 $ 29,000 1997 $ 13,000 28,000 25,000 14,000 35,000 60,000 78,000 (20,000) (24,000) $122,000 $116,000 $ 29,000 $ 23,000 5,000 8,000 27,000 33,000 18,000 14,000 43,000 38,000 $122,000 $116,000