Question

Cheyenne Inc. had the following balance sheet at December 31, 2019.

CHEYENNE INC. BALANCE SHEET DECEMBER 31, 2019
Cash		$24,640		Accounts payable		$34,640
Accounts receivable		25,840		Notes payable (long-term)		45,640
Investments		36,640		Common stock		104,640
Plant assets (net)		81,000		Retained earnings		27,840
Land		44,640				$212,760
		$212,760

During 2020, the following occurred.

1.		Cheyenne Inc. sold part of its debt investment portfolio for $18,399. This transaction resulted in a gain of $6,799 for the firm. The company classifies these investments as available-for-sale.
2.		A tract of land was purchased for $17,640 cash.
3.		Long-term notes payable in the amount of $19,399 were retired before maturity by paying $19,399 cash.
4.		An additional $23,399 in common stock was issued at par.
5.		Dividends of $11,599 were declared and paid to stockholders.
6.		Net income for 2020 was $36,640 after allowing for depreciation of $14,399.
7.		Land was purchased through the issuance of $39,640 in bonds.
8.		At December 31, 2020, Cash was $41,640, Accounts Receivable was $46,240, and Accounts Payable remained at $34,640.

Prepare a statement of cash flows for 2020

Prepare an unclassified balance sheet as it would appear at December 31, 2020. (List Assets in order of liquidity.)

Compute two cash flow ratios

Answer 1

Cash Flow Statement
Indirect Method
Cash Flow from Operating Activities
Net Income		36,640
Adjustments
Depreciation	14,399
Gain on sale of investment	(6,799)
Changes in Current Assets/ Current Liabilities
Increase in Accounts Receivable	(20,400)
Total Adjustments		(12,800)
Net Cash from Operating Activities			23,840
Cash flow from Investing Activities
Sale of Investment		18,399
Purchase of Land		(17,640)
Net cash from investing activities			759
Cash flow from Financing Activities
Issue of Common Stock		23,399
Repayment of long term notes		(19,399)
Dividend Paid		(11,599)
Net cash used in financing activities			(7,599)
Increase in Cash			17,000
Opening Balance of Cash			24,640
Closing Balance of Cash			41,640

Balance Sheet
Assets
Cash	41,640.00
Accounts Receivable	46,240.00
Investments	25,040.00
Plant Assets (Net)	62,951.00
Land	101,920.00
Total Assets	277,791.00
Liabilities and Stockholder's Equity
Accounts Payable	30,990.00
Notes Payable (Long Term)	26,241.00
Bonds Payable	39,640.00
Common Stock	128,039.00
Retained Earnings	52,881.00
Total Liabilities and Stockholder's Equity	277,791.00

Current Cash Debt coverage ratio = Net cash provided by operating activities / Current liabilities

= 23840 / 30990 = 0.77

Cash Debt Coverage Ratio = Net cash provided by operating activities / Total liabilities

= 23840 / 96871 = 0.25

Current Cash Debt Coverage Ratio = 0.77

Cash Debt Coverage Ratio = 0.25