Question
The balance sheet for Sherban Company at year-end is below: Sherban Company Balance Sheet December 31, 2019 Assets Liabilities & Shareholders Equity Cash $ 44,000
The balance sheet for Sherban Company at year-end is below:
Sherban Company Balance Sheet December 31, 2019
Assets |
| Liabilities & Shareholders Equity | |
Cash | $ 44,000 | Accounts payable $ 28,000 | |
Accounts receivable | 39,000 | Bonds payable 54,000 | |
Buildings and equipment Accumulated depreciation buildings and equipment | 178,000
(46,000) |
Common shares 69,000 | |
|
| Retained earnings 64,000 | |
Total Assets $215,000 | Total Liabilities and Equity | $215,000 |
Additional information:
- The December 31, 2019 balance in accounts receivable represents an increase of $19,000 over last years balance.
- Net income for 2019 is $60,000.
- Depreciation expense for 2019 is $15,000.
- In 2019, the company made cash purchases for land, $27,000 and equipment, $52,000. The opening balances of selected accounts at January 1, 2019 were as follows:
Retained Earnings, Jan 1, 2019 | $29,000. |
Accounts Payable, Jan 1, 2019 | $21,000 |
Bonds Payable, Jan 1, 2019 | $15,000 |
Assume bonds are non-current liabilities and cash dividends were paid.
Required: Assuming Sherban reports dividends paid as a financing activity:
- Calculate net cash flow from operating activities. Use a proper three-line title. Show all calculations. (5 marks)
- Calculate Sherbans current cash debt coverage ratio, cash debt coverage ratio and free cash flow (3 marks)
- Using your answers in part (b) and comment on Sherbans liquidity and financial flexibility (1 marks).
- Under IFRS, how else might Sherban account for cash dividends paid in the cash flow statement? (1 mark)
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