The balance sheet for Sherban Company at year-end is below: Sherban Company Balance Sheet December 31,...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
The balance sheet for Sherban Company at year-end is below: Sherban Company Balance Sheet December 31, 2019 Assets Liabilities & Shareholders' Equity $ 44,000 $ 28,000 Cash Accounts receivable Accounts payable Bonds payable 39,000 54,000 Buildings and equipment 178,000 Accumulated depreciation- buildings and equipment (46,000) Common shares 69,000 Retained earnings 64,000 Total Assets $215.000 Total Liabilities and Equity $215.000 Additional information: 1. The December 31, 2019 balance in accounts receivable represents an increase of $19,000 over last year's balance. 2. Net income for 2019 is $60,000. 3. Depreciation expense for 2019 is $15,000. 4. 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: a) Calculate net cash flow from operating activities. Use a proper three-line title. Show all calculations. (5 marks) b) Calculate Sherban's current cash debt coverage ratio, cash debt coverage ratio and free cash flow (3 marks) c) Using your answers in part (b) and comment on Sherban's liquidity and financial flexibility (1 marks). d) Under IFRS, how else might Sherban account for cash dividends paid in the cash flow statement? (1 mark) The balance sheet for Sherban Company at year-end is below: Sherban Company Balance Sheet December 31, 2019 Assets Liabilities & Shareholders' Equity $ 44,000 $ 28,000 Cash Accounts receivable Accounts payable Bonds payable 39,000 54,000 Buildings and equipment 178,000 Accumulated depreciation- buildings and equipment (46,000) Common shares 69,000 Retained earnings 64,000 Total Assets $215.000 Total Liabilities and Equity $215.000 Additional information: 1. The December 31, 2019 balance in accounts receivable represents an increase of $19,000 over last year's balance. 2. Net income for 2019 is $60,000. 3. Depreciation expense for 2019 is $15,000. 4. 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: a) Calculate net cash flow from operating activities. Use a proper three-line title. Show all calculations. (5 marks) b) Calculate Sherban's current cash debt coverage ratio, cash debt coverage ratio and free cash flow (3 marks) c) Using your answers in part (b) and comment on Sherban's liquidity and financial flexibility (1 marks). d) Under IFRS, how else might Sherban account for cash dividends paid in the cash flow statement? (1 mark)
Expert Answer:
Answer rating: 100% (QA)
c Sherban has adequate cash flow coverage for current li... View the full answer
Related Book For
Financial and Managerial Accounting
ISBN: 978-1119392132
3rd edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Posted Date:
Students also viewed these banking questions
-
The balance sheet for the Heir Jordan Corporation follows. Based on this information and the income statement in the previous problem, supply the missing information using the percentage of sales...
-
In Problem 30.5, construct the balance sheet for the new corporation, assuming that the transaction is treated as a purchase for accounting purposes. The market value of All Gold Minings fixed assets...
-
The balance sheet for Kamel Corporation follows. Required Compute the following. $ 240,000 760,000 $1,000,000 $ 150,000 450,000 Current assets Long-term assets (net) Total assets Current liabilities...
-
What are the three shapes of periodic signals a function generator can produce?
-
Think of a manager you have worked under or a leader you have been in close contact with. What were the main sources of this person's individual power? What was your reaction to the way this person...
-
Determine whether each of the following statements is true or false, or uncertain. Explain your answers: a. The opportunity cost of an activity is the total value of all the alternatives passed up....
-
When is a paradigm shift necessary?
-
In early 2012, Sosa Enterprises purchased a new machine for $10,000 to make cork stoppers for wine bottles. The machine has a 3-year recovery period and is expected to have a salvage value of $2,000....
-
Q3. (1) Evaluate ],_,"(zz + z)dz, along the line joining the points (1, -1) and (2, 3). (ii) Evaluate by using Cauchy's integral formula Jc 22_3212 dz, where C: |z - 2| = =
-
The trial balance of Pacilio Security Services Inc. as of January 1, 2017, had the following normal balances: Cash ................. 78 , 972 P e t t y C a s h . . . . . . . . . . . . . . . . 100 A c...
-
Assume that you are borrowing from a payday loan vendor for $100 for a month and agree to pay back $105 at the end of the month. How much is the APR of the loan
-
A company borrows \($10,000\) for two years, interest free, when the market interest rate is 10%, compounded annually. At what amount should the liability be valued? How would your answer change if...
-
A company has a \($2\) million operating line of credit at an interest rate of 4% and (general use) long-term loans of \($8\) million at an interest rate of 7%. If general bor rowings are used to...
-
How would the payment of a \($5,000\) upfront administration fee on a \($50,000\), 6%, five-year loan affect subsequent recognition of interest expense?
-
Interest expense of \($45,500\) is recorded, after discount amortization of \($4,500\). Interest payable has increased by \($2,000\) during the year. How much cash was paid for interest?
-
Assume that a Canadian company borrowed US\($325,000\), for five years, when US\($1\) = Cdn\($1.10\). If the exchange rate at the end of the first year is US\($1\) = Cdn\($1.08\), and at the end of...
-
What is the two-party system? a) a system, laid out in the Constitution, that calls for only two major parties to compete in most elections b) a system in which only two parties have a realistic oppor
-
Identify Thank You mission, strategy and core competencies. Identify strategy changes that have taken place at Thank You since its founding in 2008. Your answer must in text references and must be...
-
Snow Cap Springs produces and sells water filtration systems for homeowners. Information regarding its three models is shown below. The company's total fixed costs to produce the filtration systems...
-
The trial balance of D. Savage Company at the end of its fiscal year, August 31, 2020, includes these accounts: Inventory $17,200, Purchases $149,000, Sales Revenue $190,000, Freight-In $5,000, Sales...
-
Action Quest Games Inc. adjusts its accounts annually. The following information is available for the year ended December 31, 2020. Purchased a 1-year insurance policy on June 1 for $1,800 cash. Paid...
-
Overtime pay for a production department Curry Company employs nine production workers at $7.00 per hour for first shift and a 50 percent overtime premium for any hours worked in excess of 40 per...
-
Understanding inventory cost data Data relevant to Job No. QV1173 are: An analysis of the production data indicate a number of additional items as follows: a. In addition to the 200 good units, there...
-
Identifying errors in accounting for materials Ristlott Company is a small manufactur- ing company using a perpetual inventory system. Recently the company hired an accountant who has not worked for...
Study smarter with the SolutionInn App