Malouin Corp.’s income statement for the year ended December 31, 2023, had the following condensed information:

There were no purchases or sales of trading (FV-NI) investments during 2023.

Malouin’s statement of financial position included the following comparative data at December 31:

Instructions

a. Prepare the operating activities section of the statement of cash flows using the direct method.

b. Assume that Malouin’s current cash debt coverage ratio in 2022 was 4.5. Calculate the company’s current cash debt coverage ratio in 2023, and discuss the results from the perspective of a creditor.

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Service revenue Operating expenses (excluding depreciation) Depreciation expense Unrealized loss on FV-NI investments Loss on disposal of equipment Income before income tax Income tax expense Net income $499,000 66,000 4,000 14,000 $778,000 583,000 195,000 58,000 $137,000