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The comparative balance sheets of Zeke Corporation at the beginning and end of year 2018 appear below.
Zeke Corporation
Balance Sheets
During the year 2018, Zeke purchased equipment for $14,000 cash, declared and paid cash dividends of $11,200, sold
investments for $19,000, and reported net income of $20,300.
Instructions
Prepare a statement of cash flows for Zeke Corporation for the year ending December 31, 2018.
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Solution:
Zeke Corporation
Statement of Cash Flows
For the Year ending 12/31/18
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Ch. 23 Statement of Cash Flow Example #2
Zoe Inc. had the following balance sheet at December 31, 2017.
ZOE INC.
BALANCE SHEET
DECEMBER 31, 2017
Cash $20,000
Accounts receivable 21,200
Investments 32,000
Plant assets (net) 81,000
Land 40,000
$194,200
Accounts payable $30,000
Bonds payable 41,000
Common stock 100,000
Retained earnings 23,200
$194,200
Instructions
(a) Prepare a statement of cash flows for the year 2018 for Zoe.
(b) Prepare the balance sheet as it would appear at December 31, 2018.
(c) Computer Zoe’s free cash flow, the current cash debt coverage ratio and cash debt coverage ratio for 2018.
(d) Use the analysis of Zoe to illustrate how information in the balance sheet and statement flows helps the user
of the financial statements.
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Solution:
Current Cash Debt Coverage Ratio: Net Cash Provided by Operating ÷Average Current Liabilities
Current cash debt coverage is 1.12 to 1 (39200/*35000) (*35000 = (30000+40000)/2)
Cash Debt Coverage Ratio: Net Cash Provided by Operating Activities ÷Average Total Liabilities
39,200 ÷91,000 = .43 to 1 (Average total liabilities = (30,000 +41,000+40000+71,000) ÷2)
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