Aero Inc had the following statement of financial position at
Aero Inc. had the following statement of financial position at the end of operations for 2013:
During 2014, the following occurred:
1. Aero liquidated its investment portfolio at a loss of $5,000. The investments were fair value-net income investments.
2. A parcel of land was purchased for $38,000.
3. An additional $30,000 worth of common shares was issued.
4. Dividends totaling $10,000 were declared and paid to shareholders.
5. Net income for 2014 was $35,000, including $12,000 in depreciation expense.
6. Land was purchased through the issuance of $30,000 in additional bonds.
7. At December 31, 2014, Cash was $70,200; Accounts Receivable was $42,000; and Accounts Payable was $40,000.
(a) Prepare the statement of financial position as it would appear at December 31, 2014.
(b) Prepare a statement of cash flows for the year ended December 31, 2014. Assume dividends paid are treated as financing activities.
*(c) Calculate the current and acid test ratios for 2013 and 2014.
*(d) Calculate Aero's free cash flow and the current cash debt coverage ratio for 2014.
(e) 'What is the cash flow pattern? Discuss the sources and uses of cash.
(f) Use the analysis of Aero to illustrate how information in the statement of financial position and statement of cash flows helps the user of the financial statements.
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