12.8 Correction I need help figuring out the red boxes that i got incorrect Exer
ID: 2497524 • Letter: 1
Question
12.8 Correction
I need help figuring out the red boxes that i got incorrect
Exercise 12-8 Shown below are comparative balance sheets for Schmitt Company. SCHMITT COMPANY Comparative Balance Sheets December 31 2013 Assets Cash Accounts receivable Inventory Land Equipment Accumulated depreciation-equipment Total Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earning:s Total 2014 $ 55,080 71,280 135,270 64,800 210,600 $ 17,820 61,560 153,090 81,000 162,000 (53,460 ) (25,920 ) $483,570 $449,550 $ 31,590 121,500 174,960 155,520 $483,570 $ 34,830 162,000 140,940 111,780 $449,550 Additional information: 1. Net income for 2014 was $75,330. 2. Depreciation expense was $27,540 3. Cash dividends of $31,590 were declared and paid 4. Bonds payable amounting to $40,500 were redeemed for cash $40,500. 5. Common stock was issued for $34,020 cash. 6. No equipment was sold during 2014. 7. Land was sold for its book valueExplanation / Answer
Solution.
Cash flow from opereting activities :-
Add - Depreciation expense = 27,540
Less - Increse in account receivable = 9,720 (61560 - 71280 )
Add - Decrese in inventory = 17,820 (15,390 - 135,270 )
Less - Decrese in account payable = 3,240 (31,590 - 34,830)
Addition in net profit 32,410
Net cash flow from opereting activites = 107,730
Net cash flow from investing activities.=
Net cash flow from Financing activities =
2.
i. Current cash debt coverage ratio =
Net cash provided from opereting activites / Averege current libilities
107,730 / 33,210 = 3.24 times
ii. Cash debt coverage = opereting cash flow / Total debt
= 107,730 / 483,570
= .22
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