Comparative balance sheets for Will Smith Company are presented below.

Additional information:
1. Net income for 2006 was $125,000.
2. Cash dividends of $40,000 were declared and paid.
3. Bonds payable amounting to $50,000 were redeemed for cash $50,000.
4. Common stock was issued for $30,000 cash.
5. Depreciation expense was $24,000.
6. Sales for the year were $978,000.
Instructions

(a) Prepare a statement of cash flows for 2006 using the indirect method.

(b) Compute free cash flow.

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Assets WILL SMITH COMPANY Comparative Balance Sheets December 31 Cash Accounts receivable Inventories Land Equipment Accumulated depreciation Total Liabilities and Stockholders' Equity Accounts payable Bonds payable Common stock ($1 par) Retained earnings Total 2006 2005 $ 58,000 $ 22,000 85,000 76,000 180,000 189,000 80,000 100,000 260,000 200,000 (66,000) (42,000) $597,000 $545,000 $ 34,000 $ 47,000 150,000 200,000 194,000 164,000 219,000 134,000 $597,000 $545,000