Prepare a Statement of Cash Flows; Free Cash Flow [LO1, LO2, LO3]

Comparative financial statement data for Holly Company are given below:

December 31 This Year Last Year Assets Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4 $ 7 Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . 36 29 Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 61 Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 115 97 Property, plant, and equipment . . . . . . . . . . . . . . . 210 180 Less accumulated depreciation . . . . . . . . . . . . . 40 30 Net property, plant, and equipment . . . . . . . . . . . . 170 150 Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $285 $247 Liabilities and Stockholders’ Equity Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . $ 45 $ 39 Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 70 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . 150 138 Total liabilities and stockholders’ equity . . . . . . . . . $285 $247 For this year, the company reported net income as follows:
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500 Cost of goods sold . . . . . . . . . . . . . . . . . . . . . 300 Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . 200 Selling and administrative expenses . . . . . . . 180 Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20 This year Holly declared and paid a cash dividend. There were no sales of plant and equipment during this year. The company did not repurchase any of its own stock this year.
Required:
1. Using the indirect method, prepare a statement of cash flows for this year.
2. Compute Holly’s free cash flow for this year.