E5-16B (Preparation of a Statement of Cash Flows) A comparative balance sheet for Gokhale Corporation is presented below.

E5-16B (Preparation of a Statement of Cash Flows) A comparative balance sheet for Gokhale Corporation

is presented below.

                                                                                     December 31                        

Assets                                                              2014                            2013

Cash                                                           $109,500                      $ 33,000

Accounts receivable                                   123,000                        99,000

Inventories                                                   270,000                      283,500

Land                                                             106,500                       165,000

Equipment                                                  390,000                       300,000

Accumulated depreciation—equipment (103,500)                 (63,000)

     Total                                                      $895,500                     $817,500

Liabilities and Stockholders’ Equity

Accounts payable                                    $ 51,000                       $ 70,500

Bonds payable                                          225,000                         300,000

Common stock ($1 par)                          321,000                         246,000

Retained earnings                                   298,500                         201,000

       Total                                                    $895,500                     $817,500

Additional information: 

1. Net income for 2014 was $187,500.

2. Cash dividends of $90,000 were declared and paid.

3. Bonds payable amounting to $75,000 were retired through issuance of common stock.

Instructions

(a) Prepare a statement of cash flows for 2014 for Gokhale Corporation.

(b) Determine Gokhale Corporation’s current cash debt coverage ratio, cash debt coverage ratio, and

free cash flow. Comment on its liquidity and financial flexibility.