Presented below are the financial statements of Kurtzel Company.

KURTZEL COMPANY Comparative Balance Sheets December 31 Assets 2014 2013 Cash $ 35,000 $ 20,000 Accounts receivable 20,000 14,000 Inventory 28,000 20,000 Property, plant, and equipment 60,000 78,000 Accumulated depreciation (32,000) (24,000)

Total $111,000 $108,000 Liabilities and Stockholders’ Equity Accounts payable $ 19,000 $ 15,000 Income taxes payable 7,000 8,000 Bonds payable 17,000 33,000 Common stock 18,000 14,000 Retained earnings 50,000 38,000 Total $111,000 $108,000 KURTZEL COMPANY Income Statement For the Year Ended December 31, 2014 Sales revenue $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 Depreciation expense was $17,500.

2 Dividends declared and paid were $20,000.

3 During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had accumulated depreciation of $9,500 at the time of sale.

Instructions

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

(b) Compute these cash-based measures:

(1) Current cash debt coverage.

(2) Cash debt coverage.

(3) Free cash flow.

AppendixLO1