Data for Rocastle 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.

3. All depreciation expense is in the operating expenses.

4. All sales and purchases are on account.

Instructions

(a) Prepare a statement of cash flows using the direct method.

(b) Compute free cash flow.