Here are the financial statements of Mountain King Tours Ltd. 

The following additional data were provided:

1. Dividends of $12 000 were declared and paid.

2. During the year equipment was sold for $10 000 cash. This equipment cost $15 000 originally and had a carrying amount of $10 000 at the time of sale.

3. All depreciation expense, $11 000, is in the selling expense category.

4. All sales and purchases are on account.

5. Additional accessories for the climbing equipment were purchased for $7000 cash. The accessories are reported as part of the asset, climbing equipment.

6. Accounts payable pertains to inventory creditors. Inventory comprises food and liquor sold on tours.

7. All operating expenses except depreciation are paid in cash.

Required

(a) Prepare a statement of cash flows using the direct method for operating cash flows.

(b) Prepare a reconciliation of profit and cash provided by operations.

(c) Calculate these cash-based measures:  

1. Current cash debt coverage 

2. Cash return on sales ratio

3. Cash debt coverage

4. Free cash flow.

(d) Discuss the cash adequacy as indicated by the ratios.

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Assets Cash Accounts receivable Inventory Equipment MOUNTAIN KING TOURS LTD Statement of financial position as at 31 December 2016 2016 Less: Accumulated depreciation Total Liabilities and equity Accounts payable Income tax payable Debentures payable Share capital Retained earnings Total $ 70000 (30 000) $ 30000 18 000 34 000 40 000 $122 000 $ 29 000 15 000 15 000 30 000 33 000 $122 000 $ 78000 (24 000) 2015 $ 13000 14000 35 000 54000 $116000 33 000 20 000 10 000 25 000 28000 $116000