View the step-by-step solution to:

Presented below are the financial statements of Weller Company.

Presented below are the financial statements of Weller Company.
WELLER COMPANY
Comparative Balance Sheets
December 31
Assets 2007 2006
Cash $35,000 $20,000
Accounts receivable 33,000 14,000
Merchandise inventory 27,000 20,000
Property, plant, and equipment 60,000 78,000
Accumulated depreciation (29,000) (24,000)
Total $126,000 $108,000
Liabilities and Stockholders' Equity
Accounts payable $29,000 $15,000
Income taxes payable 7,000 8,000
Bonds payable 27,000 33,000
Common stock 18,000 14,000
Retained earnings 45,000 38,000
Total $126,000 $108,000
WELLER COMPANY
Income Statement
For the Year Ended December 31, 2007
Sales $242,000
Cost of goods sold 175,000
Gross profit 67,000
Selling expenses $18,000
Administrative expenses 6,000 24,000
Income from operations 43,000
Interest expense 3,000
Income before income taxes 40,000
Income tax expense 8,000
Net income $32,000
Additional data:
1. Dividends declared and paid were $25,000
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 cash flow.

P12-7A
Presented below are the financial statements of Weller Company.
WELLER COMPANY
Comparative Balance Sheets
December 31
Assets 2007 2006
Cash $35,000 $20,000
Accounts receivable 33,000 14,000
Merchandise inventory 27,000 20,000
Property, plant, and equipment 60,000 78,000
Accumulated depreciation (29,000) (24,000)
Total $126,000 $108,000
Liabilities and Stockholders’ Equity
Accounts payable $29,000 $15,000
Income taxes payable 7,000 8,000
Bonds payable 27,000 33,000
Common stock 18,000 14,000
Retained earnings 45,000 38,000
Total $126,000 $108,000
WELLER COMPANY
Income Statement
For the Year Ended December 31, 2007
Sales
$242,000
Cost of goods sold
175,000
Gross profit
67,000
Selling expenses $18,000
Administrative expenses 6,000 24,000
Income from operations
43,000
Interest expense
3,000
Income before income taxes
40,000
Income tax expense
8,000
Net income
$32,000
Additional data:
Dividends declared and paid were $25,000
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.
All depreciation expense is in the selling expense category.
All sales and purchases are on account.
Instructions:
Prepare a statement of cash flows using the indirect method.
Compute these cash-basis measures:
1. Current cash debt coverage ratio.
2. Cash debt coverage ratio.
3. Free cash flow.
Notes in the margin:
a. Cash from operations $33,500

Recently Asked Questions

Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

-

Educational Resources
  • -

    Study Documents

    Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

    Browse Documents
  • -

    Question & Answers

    Get one-on-one homework help from our expert tutors—available online 24/7. Ask your own questions or browse existing Q&A threads. Satisfaction guaranteed!

    Ask a Question