Question

Flounder Corp.’s income statement for the year ended December 31, 2020, had the following condensed information:

Service revenue				$773,000
Operating expenses (excluding depreciation)		$491,000
Depreciation expense		60,000
Unrealized loss on FV-NI investments		4,700
Loss on sale of equipment		12,300		568,000
Income before income taxes				205,000
Income tax expense				57,000
Net income				$148,000

There were no purchases or sales of trading (FV-NI) investments during 2020.

Flounder’s statement of financial position included the following comparative data at December 31:

		2020		2019
FV-NI investments		$21,500		$26,200
Accounts receivable		35,500		55,100
Accounts payable		45,500		32,000
Income tax payable		7,100		9,200

Prepare the operating activities section of the statement of cash flows using the direct method. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

Flounder Corp. Partial Statement of Cash Flows (Direct Method) choose the accounting period                                                                      For the Month Ended December 31, 2020For the Year Ended December 31, 2020December 31, 2020
select an opening section name                                                                      Net Cash Provided by Investing ActivitiesNet Cash Used by Investing ActivitiesNet Cash Used by Financing ActivitiesNet Cash Provided by Operating ActivitiesCash Flows from Investing ActivitiesCash at End of PeriodCash Flows from Financing ActivitiesNet Cash Used by Operating ActivitiesNet Increase in CashCash at Beginning of PeriodCash Flows from Operating ActivitiesNet Cash Provided by Financing ActivitiesNet Decrease in Cash
select an item                                                                      Cash Paid For Income TaxesCash Paid To SuppliersSale of EquipmentCash Received from CustomersPurchase of Equipment				$enter a dollar amount
select an item                                                                      Sale of EquipmentCash Paid For Income TaxesCash Paid To SuppliersCash Received from CustomersPurchase of Equipment		$enter a dollar amount
select an item                                                                      Cash Paid To SuppliersCash Received from CustomersSale of EquipmentPurchase of EquipmentCash Paid For Income Taxes		enter a dollar amount
				enter a subtotal of the two preivous amounts
select a closing section name                                                                      Cash at End of PeriodNet Cash Used by Operating ActivitiesNet Increase in CashNet Cash Used by Financing ActivitiesNet Cash Provided by Financing ActivitiesCash at Beginning of PeriodNet Cash Provided by Operating ActivitiesNet Cash Provided by Investing ActivitiesCash Flows from Investing ActivitiesCash Flows from Operating ActivitiesNet Cash Used by Investing ActivitiesCash Flows from Financing ActivitiesNet Decrease in Cash				$enter a total amount for this section

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Assume that Flounder Corp.’s current cash debt coverage ratio in 2019 was 4.5. Calculate the company’s current cash debt coverage ratio in 2020. (Round answer to 1 decimal places, e.g. 7.5.)

Cash Debt Coverage Ratio enter Cash Debt Coverage Ratio in times tounded to 1 decimal place  times

Answer 1

Flounder Corp.
Partial Statement of Cash Flows (Direct Method)
For the Year Ended December 31, 2020
Cash Flows from Operating Activities*
Cash received from customers	792600
Cash paid to suppliers	-477500
Cash paid for income taxes	-59100
Net cash provided by operating activities*	256000

*Select appropriately since list of options provided is incomplete. For any clarifications, write under comments.

Workings:

Cash received from customers
Service revenue	773000
Add: Decrease in Accounts Receivable	19600
	792600
Cash paid to suppliers
Operating expenses	491000
Less: Increase in Accounts Payable	13500
	477500
Cash paid for income taxes
Income tax expense	57000
Add: Decrease in Income Tax Payable	2100
Add: Increase in prepaid expenses	59100

Current cash debt coverage ratio = Net cash provided by operating activities/Average current liabilities

Average current liabilities in 2020 = ($32000 + $45500 + $9200 + $7100)/2 = $93800/2 = 46900

Current cash debt coverage ratio in 2020 = $256000/$46900 = 5.5