A Presented below are the financial statements of Warner Company. Additional data: 1. Depreciation expense was $17,500. 2. Dividends declared and paid were $20,000. 3.

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A Presented below are the financial statements of Warner Company.

Additional data:
1. Depreciation expense was $17,500.
2. Dividends declared and paid were $20,000.
3. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had accumulated depreciation of $9,500 at the time of sale.
Instructions
(a) Prepare a statement of cash flows using the indirect method.
(b) Compute free cash flow.

WARNER COMPANY Comparative Balance Sheets December 31 Assets Cash Accounts receivable 2017 2016 $ 20,000 14,000 20,000 78,000 (24,000) $108,000 S35,000 20,000 28,000 60,000 (32,000) Property, plant, and equipment Total $111,000 Liabilities and Stockholders' Equit Accounts payable Income taxes payable Bonds payable Common stock Retained earnings Total S 19,000 7,000 17,000 18,000 50,000 S111,000 S 15,000 8,000 33,000 14,000 38,000 $108,000 WARNER COMPANY Income Statement For the Year Ended December 31, 2017 Sales revenue Cost of goods sold Gross profit Selling expenses $242,000 175,000 67,000 $18,000 6,000 Income from operations Interest expense Income before income taxes Income tax expense Net income 24,000 43,000 3,000 40,000 8,000 32,000