P12-7A Helwany Company

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P12-7A Presented below are the financial statements of Helwany Company.

HELWANY COMPANY
Comparative Balance Sheets
December 31

Assets 2012 2011
Cash $ 35,000 $ 20,000
Accounts receivable 20,000 14,000
Inventory 28,000 20,000
Property, plant, and equipment 60,000 78,000
Accumulated depreciation (32,000) (24,000)
Total $111,000 $108,000
Liabilities and Stockholders’ Equity
Accounts payable $ 19,000 $ 15,000
Income taxes payable 7,000 8,000
Bonds payable 17,000 33,000
Common stock 18,000 14,000
Retained earnings 50,000 38,000
Total $111,000 $108,000

HELWANY COMPANY
Income Statement
For the Year Ended December 31, 2012

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. Depreciation expense was $17,500.

2. Dividends declared and paid were $20,000.

3. During the year equipment was sold for $8,500 cash. This equipment cost $18,000
originally and had accumulated depreciation of $9,500 at the time of sale.

Instructions

(a) Prepare a statement of cash flows using the indirect method.

(b) Compute these cash-based measures:

(1) Current cash debt coverage ratio.

(2) Cash debt coverage ratio.

(3) Free cash flow.