Data for Warner Company are presented in P12-7A. Further analysis reveals the following. LO11 1. Accounts payable pertain to merchandise suppliers.

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

3. All depreciation expense is in the selling expense category.

4. All sales and purchases are on account.

Instructions

(a) Prepare a statement of cash fl ows for Warner Company using the direct method.

(b) Compute free cash fl ow.