A comparative balance sheet for Shabbona Corporation is presented as follows.

Additional information:

1. Net income for 2020 was $125,000. No gains or losses were recorded in 2020.

2. Cash dividends of $60,000 were declared and paid.

3. Bonds payable amounting to $50,000 were retired through issuance of common stock.

Instructions

a. Prepare a statement of cash flows for 2020 for Shabbona Corporation.

b. Determine Shabbona Corporation?s current cash debt coverage, cash debt coverage, and free cash flow. Comment on its liquidity and fi nancial flexibility.

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December 31 Assets 2020 2019 $ 73,000 $ 22,000 Cash Accounts receivable 82,000 66,000 Inventory 180,000 189,000 Land 110,000 71,000 Equipment Accumulated depreciation-equipment 260,000 200,000 (42,000) (69,000) Total $597,000 $545,000 Liabilities and Stockholders' Equity $ 34,000 $ 47,000 Accounts payable Bonds payable Common stock ($1 par) Retained earnings 150,000 200,000 214,000 164,000 134,000 199,000 Total $597,000 $545,000