The comparative statements of Osborne Company are presented below: OSBORNE COMPANY Income Statements For the Years Ended December 31 2014 2013 Net sales $1,897,652 $1,757,612 Cost of goods sols 1,065,652 1,013,112 Gross profit 832,000 744,500 Selling and administrative expenses 507,112 486,112 Income from operations 324,888 258,388 Other expenses and losses Interest expense 23,327 21,327 Income before income taxes 301,561 237,061 Income tax expense 93,327 74,327 Net income $208,234 $162,734 OSBORNE COMPANY Balance Sheets December 31 2014 2013 Assets Current Assets Cash $60,100 $64,200 Debt investments (short-term) 74,000 50,000 Accounts receivable 124,912 109,912 Inventory 127,327 116,827 Total current assets 386,339 340,939 Plant assets (net) 659,589 530,889 Total assets $1,045,928 $871,828 Liabilities and Stockholders' Equity Current liabilities Accounts payable $167,112 $152,512 Income taxes payable 44,827 43,327 Total current liabilities 211,939 195,839 Bonds payable 230,589 210,589 Total liabilities 442,528 406,428 Stockholders' equity Common stock ($5 par) 290,000 300,000 Retained earniings 313,400 165,400 Total stockholders' equity 603,400 465,400 Total liabilities and stockholders' equity $1,045,928 $871,828 All sales were on account. Net cash provided by operating activities for 2014 was $228,840. Capital expenditures were $135,570, and cash dividends were $60,234. Compute the current cash debt coverage for 2014 of Osborne Company
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
The comparative statements of Osborne Company are presented below:
OSBORNE COMPANY
Income Statements
For the Years Ended December 31
2014 2013
Net sales $1,897,652 $1,757,612
Cost of goods sols 1,065,652 1,013,112
Gross profit 832,000 744,500
Selling and administrative expenses 507,112 486,112
Income from operations 324,888 258,388
Other expenses and losses
Interest expense 23,327 21,327
Income before income taxes 301,561 237,061
Income tax expense 93,327 74,327
Net income $208,234 $162,734
OSBORNE COMPANY
December 31
2014 2013
Assets
Current Assets
Cash $60,100 $64,200
Debt investments (short-term) 74,000 50,000
Inventory 127,327 116,827
Total current assets 386,339 340,939
Plant assets (net) 659,589 530,889
Total assets $1,045,928 $871,828
Liabilities and
Current liabilities
Accounts payable $167,112 $152,512
Income taxes payable 44,827 43,327
Total current liabilities 211,939 195,839
Bonds payable 230,589 210,589
Total liabilities 442,528 406,428
Stockholders' equity
Common stock ($5 par) 290,000 300,000
Retained earniings 313,400 165,400
Total stockholders' equity 603,400 465,400
Total liabilities and stockholders' equity $1,045,928 $871,828
All sales were on account. Net cash provided by operating activities for 2014 was $228,840. Capital expenditures were $135,570, and cash dividends were $60,234.
Compute the current cash debt coverage for 2014 of Osborne Company.
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