The comparative balance sheets of Madrasah Corporation at the beginning and end of the year 2025 are as follows.

Net income of $44,000 was reported, and dividends of $33,000 were paid in 2025. New equipment was purchased and none was sold.

Instructions

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

b. Compute the current ratio (current assets ÷ current liabilities) as of January 1, 2025, and December 31, 2025, and compute free cash flow for the year 2025. 

c. In light of the analysis in (b), comment on Madrasah’s liquidity and financial flexibility.

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Madrasah Corporation Balance Sheets Assets Cash Accounts receivable Equipment Less: Accumulated depreciation-equipment Total Liabilities and Stockholders' Equity Accounts payable Common stock Retained earnings Total Dec. 31, 2025 $ 20,000 106,000 39,000 17,000 $148,000 $ 20,000 100,000 28,000 $148,000 Jan. 1, 2025 $ 13,000 88,000 22,000 11,000 $112,000 $ 15,000 80,000 17,000 $112,000 Inc./Dec. $ 7,000 Inc. 18,000 Inc. 17,000 Inc. 6,000 Inc. $ 5,000 Inc. 20,000 Inc. 11,000 Inc.