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Financial statements for Space Galaxy Ltd

Accounting

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Financial statements for Space Galaxy Ltd. are presented below:

 

Space Galaxy Ltd.

Statement of Financial Position

December 31, 2020

 

Assets                                                                            Liabilities & Shareholders' Equity

Cash                                                $44,000              Accounts payable                                      $28,000

Accounts receivable                   39,000                 Bonds payable                                           54,000

Buildings and equipment           154,000

Accumulated depreciation—

buildings and equipment    (46,000)              Common shares                                  69,000

Patents                                            24,000                 Retained earnings                                      64,000

                                                        $215,000                                                                                    $215,000

 

Space Galaxy Ltd.

Statement of Cash Flows

For the Year Ended December 31, 2020

 

Cash flows from operating activities

           Net income                                                                                                                            $60,000

           Adjustments to reconcile net income to net cash

           provided by operating activities:

                          Increase in accounts receivable                                                                                  $(19,000)

                          Increase in accounts payable                                                   7,000

                          Depreciation—buildings and equipment                             12,000

                          Gain on sale of equipment                                                     (7,000)

                          Amortization of patents                                                             3,000             (4,000)

Net cash provided by operating activities                                                                             56,000

 

Cash flows from investing activities

           Sale of equipment                                                                                 14,000

           Purchase of land                                                                                    (27,000)

           Purchase of buildings and equipment                                                            (52,000)

Net cash used by investing activities                                                                                           (65,000)

 

Cash flows from financing activities

           Payment of cash dividend                                                                    (25,000)

           Sale of bonds                                                                                            45,000

Net cash provided by financing activities                                                                                   20,000

 

Net increase in cash                                                                                                                    11,000

Cash, January 1, 2020                                                                                                                                  33,000

Cash, December 31, 2020                                                                                                            $44,000

 

At the beginning of 2020, the accounts payable balance was $21,000, and the bonds payable balance was $9,000. All of Space Galaxy's bonds have been issued at par.

Question

1.      Calculate the current cash debt coverage ratio

2.      Calculate the cash debt coverage ratio

3.      Calculate the free cash flow