The balance sheet for Sherban Company at year-end is below: Sherban Company Balance Sheet December 31,...
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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:
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