20 marks Question 1 Below are the unclassified financial statements for Jazzec Ltd for the year ended September 30, 2019 Jazzec Ltd Statement of Financial Position As at September 30, 2019 2018 $ Cash 200,000 50,000 Accounts Receivable (Net) 300,000 375,000 825,000 800,000 Inventory Prepaid Insurance Expenses 20,000 25,000 Equipment 2,500,000 2,000,000 Accumulated Depreciation (700,000) (500,000) 3.145.000 2.750,000 Accounts Payable 500,000 480,000 Salaries & Wages Payable 300,000 315,000 Income Tax Payable 120,000 115,000 Accrued Interest Payable 17,000 20,000 Bonds Payable due July 31, 2022 400,000 450,000 Common Shares 1,378,000 1,140,000 430,000 230,000 Retained earnings Total liabilities and shareholder's 3,145,000 2,750,000 equity Jazzec Ltd Income Statement For the year ended September 30, 2019 $ 5,000,000 Sales Less: Cost of goods sold 3,500,000 1,500,000 Gross Profit Less Expenses: Salaries & Employee Benefits 600,000 Depreciation Expense 200,000 Interest Expense 150,000 Insurance 100,000 Income Tax Expense 250,000 1,300,000 200,000 Net Profit Additional Information: No equipment was sold during the year No dividends were declared and paid during the year Required: a) Prepare the operating activities section of the statement of cash flows using the direct method (15 marks) b) Calculate the company's current debt coverage ratio and free cash flow. Comment on the company's cash flow liquidity