Question

Ficus Inc. had the following balance sheet at December 31, 20                                                                                          

FICUS INC.                                                               

BALANCE SHEET                                                               

31-Dec-16                                                                  

                                                                       

Cash                                        $31,000.00                 Accounts Payable                    $61,000.00

Accounts Recceivable             56,800.00                   Notes Payable (Long-Term)   76,000.00

Investments                             86,000.00                   Common Stock                       200,000.00

Plant Asssets (Net)                 138,500.00                 Retained Earnings                   41,300.00

Land                                        66,000.00                  

                                                378,300.00                                                                 378,300.00

                                                                       

During 2017, the following occurred.                                                            

1          Ficus liquidated its available-for-sale investment portfolio at a gain of $15,000.    

2          A tract of land was purchased for $61,000 cash.                                                       

3          An additional $15,200 in common stock was issued at par.                                                 

4          Dividends totaling $41,000 were declared and paid to stockholders.                                               

5          Net income for 2017 was $46,000, including $8,000 in depreciation expense.                    

6          Land was purchased through the issuance of $195,000 in additional notes payable.                       

7          At December 31, 2017, Cash was $68,000, Accounts Receivable was $84,000, and Accounts Payable was $72,000.                                                                              

Instructions                                                                

(a)        Prepare a statement of cash flows for the year 2017 for Ficus.                                            

(b)       Prepare the balance sheet as it would appear at December 31, 2017.                                   

(c)        Compute Ficus’ free cash flow and the current cash debt coverage ratio for 2017.             

(d)       Use the analysis of Ficus to illustrate how information in the balance sheet and statement of cash flows helps the user of the financial statements.

Answer 1

Part A

Part B

Part C

Part D

The balance sheet helps users understand the overall financial position of the entity. IT helps assess the solvency and the financial strength of the entity by showing the overall position of assets, liabilities and owners equity

Cash flows,on the other hand show the cash generting capacity of the company (cash from operations) and also indicate the quantum of funding raised/long term borrowings repaid during a particular year, including source (cash flow from financing activities) and the amounts invested in capital expenditure or received from disposal of non current assets (cash flow from invsting activities)