Data for Johnston Company are presented in P13-7B. Further analysis reveals the following.

1. Accounts payable pertains to merchandise creditors.

2. All operating expenses except for depreciation are paid in cash.

In P13-7B, Presented below are the financial statements of Johnston Company.

JOHNSTON COMPANY
Income Statement
For the Year Ended December 31, 2015
Sales revenue ..............$286,000
Cost of goods sold ........... 204,000
Gross profit .............. 82,000
Operating expenses ........... 37,000
Income from operations .......... 45,000
Interest expense ............. 7,000
Income before income taxes ........ 38,000
Income tax expense ............ 10,000
Net income .............. $ 28,000

Additional data:
1. Dividends of $23,000 were declared and paid.
2. During the year equipment was sold for $10,000 cash. This equipment cost $15,000 originally and had a book value of $10,000 at the time of sale.
3. All depreciation expense, $8,000, is in the operating expenses.
4. All sales and purchases are on account.
5. Additional equipment was purchased for $7,000 cash.

Instructions
(a) Prepare a statement of cash flows using the direct method.
(b) Compute free cashflow.

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JOHNSTON COMPANY Comparative Balance Sheets December 31 2015 $ 24,000 Assets Cash Accounts receivable Inventory Equipment Less: Accumulated depreciation 2014 33,000 14,000 25,000 25,000 41,000 $ 70,000 78,000 (27,000 43,000 (24,000 54,000 equipment Total $133,000 126,000 Liabilities and Stockholders' Equity Accounts payable Income taxes payable Bonds payable Common stock Retained earnings 31,000 24,000 20,000 25,000 33,000 $133,000 43,000 20,000 10,000 25,000 28,000 $126,000 Total