The comparative balance sheets of Madrasah Corporation at the beginning and end of the year 2020 appear below. Madrasah CorporationBalance Sheets Assets Dec. 31, 2020 Jan. 1, 2020 Inc./Dec. Cash $ 20,000 $ 13,000 $ 7,000 Inc. Accounts receivable 106,000 88,000 18,000 Inc. Equipment 39,000 22,000 17,000 Inc. Less: Accumulated depreciation—equipment 17,000 11,000 6,000 Inc. Total $148,000 $112,000 Liabilities and Stockholders' Equity Accounts payable $ 20,000 $ 15,000 5,000 Inc. Common stock 100,000 80,000 20,000 Inc. Retained earnings 28,000 17,000 11,000 Inc. Total $148,000 $112,000 Net income of $44,000 was reported, and dividends of $33,000 were paid in 2020. New equipment was purchased and none was sold. Instructions a. Prepare a statement of cash flows for the year 2020. b. Compute the current ratio (current assets ÷ current liabilities) as of January 1, 2020, and December 31, 2020, and compute free cash flow for the year 2020. c. In light of the analysis in (b), comment on Madrasah’s liquidity and financial flexibility. Problems
The comparative balance sheets of Madrasah Corporation at the beginning and end of the year 2020 appear below. Madrasah CorporationBalance Sheets Assets Dec. 31, 2020 Jan. 1, 2020 Inc./Dec. Cash $ 20,000 $ 13,000 $ 7,000 Inc. Accounts receivable 106,000 88,000 18,000 Inc. Equipment 39,000 22,000 17,000 Inc. Less: Accumulated depreciation—equipment 17,000 11,000 6,000 Inc. Total $148,000 $112,000 Liabilities and Stockholders' Equity Accounts payable $ 20,000 $ 15,000 5,000 Inc. Common stock 100,000 80,000 20,000 Inc. Retained earnings 28,000 17,000 11,000 Inc. Total $148,000 $112,000 Net income of $44,000 was reported, and dividends of $33,000 were paid in 2020. New equipment was purchased and none was sold. Instructions a. Prepare a statement of cash flows for the year 2020. b. Compute the current ratio (current assets ÷ current liabilities) as of January 1, 2020, and December 31, 2020, and compute free cash flow for the year 2020. c. In light of the analysis in (b), comment on Madrasah’s liquidity and financial flexibility. Problems
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Practice Pack
The comparative
| Madrasah Corporation Balance Sheets |
||||||
| Assets | Dec. 31, 2020 | Jan. 1, 2020 | Inc./Dec. | |||
| Cash | $ 20,000 | $ 13,000 | $ 7,000 Inc. | |||
| 106,000 | 88,000 | 18,000 Inc. | ||||
| Equipment | 39,000 | 22,000 | 17,000 Inc. | |||
| Less: |
17,000 | 11,000 | 6,000 Inc. | |||
| Total | $148,000 | $112,000 | ||||
| Liabilities and |
||||||
| Accounts payable | $ 20,000 | $ 15,000 | 5,000 Inc. | |||
| Common stock | 100,000 | 80,000 | 20,000 Inc. | |||
| 28,000 | 17,000 | 11,000 Inc. | ||||
| Total | $148,000 | $112,000 |
Net income of $44,000 was reported, and dividends of $33,000 were paid in 2020. New equipment was purchased and none was sold.
Instructions
a. Prepare a statement of
b. Compute the
c. In light of the analysis in (b), comment on Madrasah’s liquidity and financial flexibility.
Problems
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