Presented below are the financial statements of Weller Company.

Prepare a statement of cash flows—indirect method, and compute cash-based ratios. WELLER COMPANY

(SO 4, 5) Comparative Balance Sheets

— December 31 pescts pee Zs Cash $ 35,000 $ 20,000

=e Accounts receivable 33,000 14,000 Merchandise inventory 27,000 20,000 Property, plant, and equipment 60,000 78,000 Accumulated depreciation (29,000) (24,000)

Total $126,000 $108,000 Liabilities and Stockholders’ Equity Accounts payable $ 29,000 $ 15,000 Income taxes payable 7,000 8,000 Bonds payable 27,000 33,000 Common stock 18,000 14,000 Retained earnings 45,000 38,000 Total $126,000 $108,000 WELLER COMPANY Income Statement For the Year Ended December 31, 2007 Sales $242,000 Cost of goods sold 175,000 Gross profit 67,000 Selling expenses $18,000 Administrative expenses 6,000 24,000 Income from operations 43,000 Interest expense 3,000 Income before income taxes 40,000 Income tax expense 8,000 Net income $ 32,000 Additional data: 1. Dividends declared and paid were $25,000. 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.

Problems: Set A 631 3. All depreciation expense is in the selling expense category. 4. All sales and purchases are on account.

Instructions

(a) Prepare a statement of cash flows using the indirect method.

(a) Cash from operations

(b) Compute these cash-basis measures: $33,500

(1) Current cash debt coverage ratio.

(2) Cash debt coverage ratio.

(3) Free cash flow.