Aero Inc. had the following balance sheet at December 31, 2024.

During 2025, the following occurred.

1. Aero liquidated its available-for-sale debt investment portfolio at a loss of $5,000.

2. A tract of land was purchased for $38,000.

3. An additional $30,000 in common stock was issued at par.

4. Dividends totaling $10,000 were declared and paid to stockholders.

5. Net income for 2025 was $35,000, including $12,000 in depreciation expense.

6. Land was purchased through the issuance of $30,000 in additional bonds.

7. At December 31, 2025, Cash was $70,200, Accounts Receivable was $42,000, and Accounts Payable was $40,000.

Instructions

a. Prepare a statement of cash flows for the year 2025 for Aero.

b. Prepare the unclassified balance sheet as it would appear at December 31, 2025.

c. Compute Aero’s free cash flow and current cash debt coverage for 2025.

d. Use the analysis of Aero to illustrate how information in the balance sheet and statement of cash flows helps the user of the financial statements.

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Cash Accounts receivable Investments Plant assets (net) Land Aero Inc. Balance Sheet December 31, 2024 $ 20,000 21,200 32,000 81,000 40,000 $194,200 Accounts payable Bonds payable Common stock Retained earnings $ 30,000 41,000 100,000 23,200 $194,200