E5-16.

(Preparation of a Statement of Cash Flows)

(LO 5, 6) A comparative balance sheet for Shabbona Corporation is presented below.

	December 31
Assets	2017	2016
Cash	$73,000	$22,000
Accounts receivable	82,000	66,000
Inventory	180,000	189,000
Land	71,000	110,000
Equipment	260,000	200,000
Accumulated depreciationequipment	(69,000)	(42,000)
Total	$597,000	$545,000
Liabilities and Stockholders' Equity
Accounts payable	$ 34,000	$ 47,000
Bonds payable	150,000	200,000
Common stock ($1 par)	214,000	164,000
Retained earnings	199,000	134,000
Total	$597,000	$545,000

Additional information:

1.Net income for 2017 was $125,000. No gains or losses were recorded in 2017.

2.Cash dividends of $60,000 were declared and paid.

3.Bonds payable amounting to $50,000 were retired through issuance of common stock.

Instructions

(a)

Prepare a statement of cash flows for 2017 for Shabbona Corporation.

(b)

Determine Shabbona Corporation's current cash debt coverage, cash debt coverage, and free cash flow. Comment on its liquidity and financial flexibility.