Question Details

(Solution Download) Exercise 5-16 A comparative balance sheet for Shabbona Corporation is presented below. December 31 A


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise 5-16

 

A comparative balance sheet for Shabbona Corporation is presented

 

below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31

 

Assets

 

2014

 

 

2013

 

Cash$ 73,000$ 22,000
Accounts receivable82,00066,000
Inventory180,000189,000
Land71,000110,000
Equipment260,000200,000
Accumulated Depreciation-Equipment(69,000)(42,000)
   Total$597,000$545,000
Liabilities and Stockholders' Equity
Accounts payable$ 34,000$ 47,000
Bonds payable150,000200,000
Common stock ($1 par)214,000164,000
Retained earnings199,000134,000
   Total$597,000$545,000

 


 

Additional information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1.Net income for 2014 was $125,000.
2.Cash dividends of $60,000 were declared and paid.
3.Bonds payable amounting to $50,000 were retired through

 

issuance of common stock.

 

Prepare a statement of cash flows for 2014 for Shabbona

 

Corporation. (Show amounts that decrease cash flow with

 

either a - sign e.g. -15,000 or in parenthesis e.g.

 

(15,000).)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shabbona Corporation

 

Statement of Cash Flows

 

For the Year Ended December 31, 2014

 

 

Cash at

 

Beginning of YearCash at End of YearCash Flows from Financing

 

ActivitiesCash Flows from Investing ActivitiesCash Flows from

 

Operating ActivitiesNet Cash Provided by Financing ActivitiesNet

 

Cash Provided by Investing ActivitiesNet Cash Provided by Operating

 

ActivitiesNet Cash Used by Financing ActivitiesNet Cash Used by

 

Investing ActivitiesNet Cash Used by Operating ActivitiesNet

 

Decrease in CashNet Increase in CashNoncash Investing and Financing

 

Activities

 

 

    Purchase

 

of Equipment    Net

 

Income    Decrease in

 

Inventory    Increase in

 

Inventory    Decrease in Accounts

 

Payable    Depreciation

 

expense    Increase in Accounts

 

Payable    Payment of Cash

 

Dividends    Decrease in Accounts

 

Receivable    Sale of

 

Land    Increase in Accounts

 

Receivable    

 

 

$

 

 

Adjustments to reconcile net income to

 

 

Cash at

 

Beginning of YearCash at End of YearCash Flows from Financing

 

ActivitiesCash Flows from Investing ActivitiesCash Flows from

 

Operating ActivitiesNet Cash Provided by Financing ActivitiesNet

 

Cash Provided by Investing ActivitiesNet Cash Provided by Operating

 

ActivitiesNet Cash Used by Financing ActivitiesNet Cash Used by

 

Investing ActivitiesNet Cash Used by Operating ActivitiesNet

 

Decrease in CashNet Increase in CashNoncash Investing and Financing

 

Activities

 

 

    Increase

 

in Accounts Payable    Increase in

 

Inventory    Depreciation

 

expense    Decrease in Accounts

 

Payable    Increase in Accounts

 

Receivable    Sale of

 

Land    Net

 

Income    Purchase of

 

Equipment    Decrease in Accounts

 

Receivable    Payment of Cash

 

Dividends    Decrease in

 

Inventory    

 

 

$

 

 

    Sale

 

of Land    Net

 

Income    Increase in

 

Inventory    Decrease in Accounts

 

Payable    Increase in Accounts

 

Payable    Depreciation

 

expense    Increase in Accounts

 

Receivable    Purchase of

 

Equipment    Payment of Cash

 

Dividends    Decrease in Accounts

 

Receivable    Decrease in

 

Inventory    

 

 

 

 

    Sale

 

of Land    Increase in Accounts

 

Payable    Increase in

 

Inventory    Decrease in Accounts

 

Receivable    Decrease in

 

Inventory    Purchase of

 

Equipment    Payment of Cash

 

Dividends    Decrease in Accounts

 

Payable    Net

 

Income    Depreciation

 

expense    Increase in Accounts

 

Receivable    

 

 

    Decrease

 

in Inventory    Payment of Cash

 

Dividends    Depreciation

 

expense    Increase in

 

Inventory    Increase in Accounts

 

Payable    Net

 

Income    Increase in Accounts

 

Receivable    Decrease in Accounts

 

Payable    Sale of

 

Land    Decrease in Accounts

 

Receivable    Purchase of

 

Equipment    

 

 

 

 

 

 

    Cash

 

at Beginning of Year    Cash at End of

 

Year    Cash Flows from Financing

 

Activities    Cash Flows from Investing

 

Activities    Cash Flows from Operating

 

Activities    Net Cash Provided by Financing

 

Activities    Net Cash Provided by Investing

 

Activities    Net Cash Provided by Operating

 

Activities    Net Cash Used by Financing

 

Activities    Net Cash Used by Investing

 

Activities    Net Cash Used by Operating

 

Activities    Net Decrease in

 

Cash    Net Increase in

 

Cash    Noncash Investing and Financing

 

Activities    

 

 

 

 

Cash at

 

Beginning of YearCash at End of YearCash Flows from Financing

 

ActivitiesCash Flows from Investing ActivitiesCash Flows from

 

Operating ActivitiesNet Cash Provided by Financing ActivitiesNet

 

Cash Provided by Investing ActivitiesNet Cash Provided by Operating

 

ActivitiesNet Cash Used by Financing ActivitiesNet Cash Used by

 

Investing ActivitiesNet Cash Used by Operating ActivitiesNet

 

Decrease in CashNet Increase in CashNoncash Investing and Financing

 

Activities

 

 

    Decrease

 

in Accounts Receivable    Decrease in

 

Inventory    Depreciation

 

expense    Increase in Accounts

 

Receivable    Decrease in Accounts

 

Payable    Net

 

Income    Increase in

 

Inventory    Increase in Accounts

 

Payable    Sale of

 

Land    Purchase of

 

Equipment    Payment of Cash

 

Dividends    

 

 

 

 

    Sale

 

of Land    Increase in Accounts

 

Receivable    Decrease in Accounts

 

Payable    Decrease in

 

Inventory    Decrease in Accounts

 

Receivable    Depreciation

 

expense    Increase in Accounts

 

Payable    Purchase of

 

Equipment    Net

 

Income    Increase in

 

Inventory    Payment of Cash

 

Dividends    

 

 

 

 

    Cash

 

at Beginning of Year    Cash at End of

 

Year    Cash Flows from Financing

 

Activities    Cash Flows from Investing

 

Activities    Cash Flows from Operating

 

Activities    Net Cash Provided by Financing

 

Activities    Net Cash Provided by Investing

 

Activities    Net Cash Provided by Operating

 

Activities    Net Cash Used by Financing

 

Activities    Net Cash Used by Investing

 

Activities    Net Cash Used by Operating

 

Activities    Net Decrease in

 

Cash    Net Increase in

 

Cash    Noncash Investing and Financing

 

Activities    

 

 

 

 

Cash at

 

Beginning of YearCash at End of YearCash Flows from Financing

 

ActivitiesCash Flows from Investing ActivitiesCash Flows from

 

Operating ActivitiesNet Cash Provided by Financing ActivitiesNet

 

Cash Provided by Investing ActivitiesNet Cash Provided by Operating

 

ActivitiesNet Cash Used by Financing ActivitiesNet Cash Used by

 

Investing ActivitiesNet Cash Used by Operating ActivitiesNet

 

Decrease in CashNet Increase in CashNoncash Investing and Financing

 

Activities

 

 

    Decrease

 

in Accounts Receivable    Decrease in

 

Inventory    Sale of

 

Land    Purchase of

 

Equipment    Net

 

Income    Payment of Cash

 

Dividends    Decrease in Accounts

 

Payable    Increase in Accounts

 

Payable    Depreciation

 

expense    Increase in Accounts

 

Receivable    Increase in

 

Inventory    

 

 

 

 

Cash at

 

Beginning of YearCash at End of YearCash Flows from Financing

 

ActivitiesCash Flows from Investing ActivitiesCash Flows from

 

Operating ActivitiesNet Cash Provided by Financing ActivitiesNet

 

Cash Provided by Investing ActivitiesNet Cash Provided by Operating

 

ActivitiesNet Cash Used by Financing ActivitiesNet Cash Used by

 

Investing ActivitiesNet Cash Used by Operating ActivitiesNet

 

Decrease in CashNet Increase in CashNoncash Investing and Financing

 

Activities

 

 

 

 

Cash at

 

Beginning of YearCash at End of YearCash Flows from Financing

 

ActivitiesCash Flows from Investing ActivitiesCash Flows from

 

Operating ActivitiesNet Cash Provided by Financing ActivitiesNet

 

Cash Provided by Investing ActivitiesNet Cash Provided by Operating

 

ActivitiesNet Cash Used by Financing ActivitiesNet Cash Used by

 

Investing ActivitiesNet Cash Used by Operating ActivitiesNet

 

Decrease in CashNet Increase in CashNoncash Investing and Financing

 

Activities

 

 

 

 

Cash at

 

Beginning of YearCash at End of YearCash Flows from Financing

 

ActivitiesCash Flows from Investing ActivitiesCash Flows from

 

Operating ActivitiesNet Cash Provided by Financing ActivitiesNet

 

Cash Provided by Investing ActivitiesNet Cash Provided by Operating

 

ActivitiesNet Cash Used by Financing ActivitiesNet Cash Used by

 

Investing ActivitiesNet Cash Used by Operating ActivitiesNet

 

Decrease in CashNet Increase in CashNoncash Investing and Financing

 

Activities

 

 

$

 

 

Cash at

 

Beginning of YearCash at End of YearCash Flows from Financing

 

ActivitiesCash Flows from Investing ActivitiesCash Flows from

 

Operating ActivitiesNet Cash Provided by Financing ActivitiesNet

 

Cash Provided by Investing ActivitiesNet Cash Provided by Operating

 

ActivitiesNet Cash Used by Financing ActivitiesNet Cash Used by

 

Investing ActivitiesNet Cash Used by Operating ActivitiesNet

 

Decrease in CashNet Increase in CashNoncash Investing and Financing

 

Activities

 

 

      Issued common stock to

 

retire $ of bonds

 

outstanding

 

 

 

 

 

 

 

 

 

Determine Shabbona CorporationAc??cs current cash debt coverage

 

ratio, cash debt coverage ratio, and free cash flow.

 

(Round ratios to 2 decimal places., e.g.

 

0.67.)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current cash debt coverage ratio

 

 

:1
Cash debt coverage ratio

 

 

:1
Free cash flow

 

$

 

 


 

Comment on its liquidity and financial flexibility.

 

 

 

 

 

 

 

Shabbona has

 

excellentpoor liquidity. Its financial flexibility is

 

worsegood.

 

 

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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