Exercise 5-16

A comparative balance sheet for Novak Corporation is presented as follows.

		December 31
Assets		2020			2019
Cash		$ 72,810			$ 22,000
Accounts receivable		83,460			67,650
Inventory		181,460			190,650
Land		72,460			111,650
Equipment		261,460			201,650
Accumulated Depreciation-Equipment		(70,460	)		(43,650	)
Total		$601,190			$549,950
Liabilities and Stockholders' Equity
Accounts payable		$ 35,460			$ 48,650
Bonds payable		150,000			200,000
Common stock ($1 par)		214,000			164,000
Retained earnings		201,730			137,300
Total		$601,190			$549,950

Additional information:

1.		Net income for 2020 was $127,920. No gains or losses were recorded in 2020.
2.		Cash dividends of $63,490 were declared and paid.
3.		Bonds payable amounting to $50,000 were retired through issuance of common stock.

(A) Prepare a statement of cash flows for 2020 for Novak Corporation. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

(B) Determine Novak Corporations current cash debt coverage, cash debt coverage, and free cash flow. (Round current cash debt coverage and cash debt coverage to 2 decimal places., e.g. 0.67.)

Current cash debt coverage			:1
Cash debt coverage			:1
Free cash flow		$

Comment on its liquidity and financial flexibility:

Novak has (excellent or poor) liquidity. Its financial flexibility is (good or bad).

NOVAK CORPORATION Statement of Cash Flows For the Year Ended December 31, 2020 Cash Flows from Operating Activities Net Income Adjustments to reconcile net income to Net Cash Provided by Operating Activities Depreciation expense Increase in Accounts Receivable Decrease in Inventory Decrease in Accounts Payable Net Cash Provided by Operating Activities Cash Flows from Investing Activities Sale of Land Purchase of Equipment Net Cash Used by Investing Activities Cash Flows from Financing Activities Payment of Cash Dividends Net Increase in Cash Cash at Beginning of Year Cash at End of Year Noncash Investing and Financing Activities of bonds outstanding Issued common stock to retire $