Question

Whispering Winds Inc. had the following statement of financial position at the end of operations for 2016:

WHISPERING WINDS INC. Statement of Financial Position December 31, 2016
Cash		$20,000		Accounts payable		$30,000
Accounts receivable		21,200		Bonds payable		41,000
FV-NI investments		32,000		Common shares		100,000
Equipment (net)		81,000		Retained earnings		23,200
Land		40,000
		$194,200				$194,200

During 2017, the following occurred:

1.	Whispering Winds liquidated its FV-NI investments portfolio at a loss of $9,000.
2.	A parcel of land was purchased for $48,000.
3.	An additional $48,000 worth of common shares was issued.
4.	Dividends totalling $14,000 were declared and paid to shareholders.
5.	Net income for 2017 was $31,000, including $12,000 in depreciation expense.
6.	Land was purchased through the issuance of $60,000 in additional bonds.
7.	At December 31, 2017, Cash was $70,200; Accounts Receivable was $42,000; and Accounts Payable was $40,000.

A) Prepare the statement of financial position as it would appear at December 31, 2017. (List Assets in order of liquidity.)
WHISPERING WINDS INC.
Statement of Financial Position

Date:

ASSETS

_________

_________

__________

__________

Total__________

Liabilities and Shareholders’ Equity

_________

_________

__________

__________

Total ______

B) Prepare a statement of cash flows for the year ended December 31, 2017 using the indirect method. Assume dividends paid are treated as financing activities. (Show amounts that decrease cash flow with either a - sign e.g. -15,000 or in parenthesis e.g. (15,000).)

WHISPERING WINDS INC.
Statement of Cash Flows

Date:

C) Calculate the current and acid test ratios for 2016 and 2017. (Round answers to 2 decimal places, e.g. 52.75.)

2017

Current ratio_____

Acid test ratios______

2016

Current ratio_______

Acid test ratios______

D) Calculate Aero’s free cash flow and the current cash debt coverage ratio for 2017. (Round current cash debt coverage ratio to 2 decimal places, e.g. 52.75. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Free cash flow________

Current cash debt coverage ratio__________

Answer 1

	Statement of financial position
	Assets
A	cash	70200
	accounts receivables	42000
	total of current assets		112200
	land = (40000+48000+60000)		148000
	equipment =81000-12000		69000
	total of assets		112200
	Liabilities and shareholders equity
	accounts payable	40000
	bonds payable =(41000+60000)	101000
	total of liabilities		141000
	common stock = (100000+48000)	148000
	retained earnings =23200+31000-14000	40200
	total of shareholders equity		188200
	total of Liabilities and shareholders equity		329200
B-	statement of cash flow
	net income		31000
	add depreciation		12000
	add loss on sale of investment		9000
	increase in accounts receivable		-20800
	increase in accounts payable		10000
	cash flow from operating activities			41200
	cash flow from investing activities
	cash from sale of investment		23000
	purchase of land		-48000
	cash flow from investing activities			-25000
	cash flow from financing activities
	cash from issuance of share		48000	34000
	payment of dividend		-14000
	cash flow from operations			50200
	beginning balance of cash			20000
	year end cash balance			70200
C-			2017	2016
	current ratio	current assets/current liabilities	2.805	1.373333
	current assets		112200	41200
	current liabilities		40000	30000
	Acid test ratio		2017	2016
	current ratio	quick assets /current liabilities	2.805	1.373333
	current assets = quick assets		112200	41200
	current liabilities		40000	30000
D-	Free cash flow	cash flow from operating activities-cash flow from investing activities	41200-25000	16200
	Current cash debt coverage ratio	net cash from operating activities/average current liabilities	41200/35000	1.18
	cash flow from operating activities		41200
	average current liabilities	(40000+30000)/2	35000