Presented below are the financial statements of Trahan Company.

Additional data:
1. Dividends declared and paid were $20,000.
2. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.
3. All depreciation expense is in the selling expense category.
4. All sales and purchases are on account.
Instructions
(a) Prepare a statement of cash flows using the indirect method.
(b) Compute these cash-basis measures:
(1) Current cash debt coverage ratio.
(2) Cash debt coverage ratio.
(3) Free cashflow.

Transcribed Image Text:

TRAHAN COMPANY Comparative Balance Sheets December 31 Assets Cash Accounts reccivable Merchandise inventory Property, plant, and equipment Accumulated depreciation Total 2010 2009 $38,000 33,000 27,000 60,000 (32.000) $126,000 $ 20,000 14,000 20,000 78,000 (24,000) $108,000 Liabilities and Stockholders Equit Accounts payable Income taxes payable Bonds payable Common stock Retained carnings Total 24,000 7,000 27,000 18,000 50,000 $126,000 $ 15,000 8,000 33,000 14,000 38,000 $108,000 TRAHAN COMPANY Income Statement For the Year Ended December 31, 2010 $242,000 175,000 67,000 Sales Cost of goods sold Gross profit Selling expenses Administrative expenses Income from operations Interest expense Income beforc income taxes Incomc tax expense Net income $18,000 6,000 24,000 43,000 3,000 40,000 8,000 32,000