Reference no: EM133031938
Problem - The balance sheet for Sherban Company at year-end is below:
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Sherban Company Balance Sheet December 31, 2019
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Assets
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Liabilities & Shareholders' Equity
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Cash
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$44,000
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Accounts payable
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$28,000
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Accounts receivable
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39.000
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Bonds payable
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54,000
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Buildings and equipment
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178,000
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Accumulated depreciation- buildings and equipment
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(46,000)
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Common shares
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69,000
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Retained earnings
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64,000
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Total Assets
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$215,000
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Total Liabilities and Equity
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$215,000
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Additional information:
1. The December 31, 2019 balance in accounts receivable represents an increase of $19,000 over last year's balance.
2. Net income for 2019 is $60,000.
3. Depreciation expense for 2019 is $15,000.
4. In 2019, the company made cash purchases for land, $27,000 and equipment, $52,000. The opening balances of selected accounts at January 1, 2019 were as follows:
Retained Earnings, Jan 1, 2019 $29,000
Accounts Payable, Jan 1, 2019 $21,000
Bonds Payable, Jan 1, 2019 $15,000
Assume bonds are non-current liabilities and cash dividends were paid.
Required - Assuming Sherban reports dividends paid as a financing activity:
a) Calculate net cash flow from operating activities. Use a proper three-line title. Show all calculations.
b) Calculate Sherban's current cash debt coverage ratio, cash debt coverage ratio and free cash flow.
c) Using your answers in part (b) and comment on Sherban's liquidity and financial flexibility.
d) Under IFRS, how else might Sherban account for cash dividends paid in the cash flow statement?