Prepare a statement of cash flows—indirect method, and compute cash-based ratios.

Shown on the next page are the financial statements of Klemmer Company.

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Additional data:

1. Depreciation expense was $6,000.

2. Dividends of $25,000 were declared and paid.

3. During the year, equipment was sold for $10,000 cash. This equipment cost $13,000 originally and had accumulated depreciation of $3,000 at the time of sale.

4. Additional equipment was purchased for $8,000 cash.


(a) Prepare a statement of cash flows using the indirect method.

(b) Compute these cash-based measures:

(1) Current cash debt coverage ratio.

(2) Cash debt coverage ratio.

(3) Free cash flow.

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