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4 years ago

A comparative balance sheet for Sarasota Corporation is presented as follows.

Business

1 answer:

Bond [772]4 years ago

4 0

Answer:

Sarasota Corporation

1. Statement of Cash Flows for the year ended December 31, 2020:

Operating Activities:

Net Income $129,720

Non-cash adjustment:

Depreciation 26,680

Cash from operating $ 156,400

Changes in working capital:

Accounts Receivable (15,680)

Inventory 9,320

Accounts Payable (13,320)

Net cash from operating activities $136,720

Investing Activities:

Land 39,320

Equipment (59,680)

Net cash from investing activities $(20,360)

Financing Activities:

Cash dividends $(65,680)

Net cash inflows $50,680

2. Sarasota Corporation's:

a) Current Cash Debt Coverage = Cash from operating activities/Current liabilities

= $136,720/$36,360

= 3.76

b) Cash Debt Coverage = Cash from operating activities/Total liabilities

= $136,720/$186,360

= 0.73

c) Free Cash Flow = Cash from operating activities minus Capital expenditure

= $136,720 - 59,680

= $77,040

Explanation:

a) Data and Calculations:

Sarasota Corporation

Comparative Balance Sheets

As of December 31 2020 and 2019:

Assets 2020 2019 Increase Decrease

Cash $ 72,680 $ 22,000 $50,680

Accounts receivable 84,360 68,680 15,680

Inventory 182,360 191,680 $9,320

Land 73,360 112,680 39,320

Equipment 262,360 202,680 59,680

Accumulated Depreciation-Equipment

(71,360) (44,680) 26,680

Total $603,760 $553,040

Liabilities and Stockholders' Equity

Accounts payable $ 36,360 $ 49,680 13,320

Bonds payable 150,000 200,000 50,000

Common stock ($1 par) 214,000 164,000 50,000

Retained earnings 203,400 139,360

Total $603,760 $553,040

b) The decrease in bonds is not a cash flow. The increase in Common Stock is not a cash flow. The two are exchanges. In calculating the free cash flow, the cash proceeds from sale of land were not taken into consideration because the sale was a one-off transaction and not part of the operating activities of Sarasota Corporation.

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