Presented below are the financial statements of Trahan Company. TRAHAN COMPANY Comparative Balance Sheets December 31 Assets 2010 2009 Cash $ 38,000 $ 20,000 Accounts receivable 33,000 14,000 Merchandise inventory 27,000 20,000 Property, plant, and equipment 60,000 78,000 Accumulated depreciation (32,000) (24,000) Total $126,000 $ 108,000 Liabilities and Stockholders' Equity Accounts payable $ 24,000 $ 15,000 Income taxes payable 7,000 8,000 Bonds payable 27,000 33,000 Common stock 18,000 14,000 Retained earnings 50,000 38,000 Total $126,000 $ 108,000

TRAHAN COMPANY Income Statement For the Year Ended December 31, 2010 Sales $242,000 Cost of goods sold 175,000 Gross profit 67,000 Selling expenses $18,000 Administrative expenses 6,000 24,000 Income from operations 43,000 Interest expense 3,000 Income before income taxes 40,000 Income tax expense 8,000 Net income $ 32,000

Additional data: 1. Dividends declared and paid were $20,000. 2. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale. 3. All depreciation expense is in the selling expense category. 4. All sales and purchases are on account. Instructions (a) Prepare a statement of cash flows using the indirect method. (b) Compute these cash-basis measures: (1) Current cash debt coverage ratio. (2) Cash debt coverage ratio. (3) Free cash flow.