1). Prepare a statement of cash flows using the indirect method.

2.) Compute free cash flow.

Presented below are the financial statements of Vaughn Manufacturing. Vaughn Manufacturing Comparative Balance Sheets December 31 Assets Cash Accounts receivable Inventory Property, plant, and equipment Accumulated depreciation Total 2017 2016 $59,500 34,000 23,800 34,000 34,000 47,600 102,000 132,600 (54,400) (40,800) $188,700 $183,600 Liabilities and Stockholders' Equity Accounts payable Income taxes payable Bonds payable Common stock Retained earnings Total $32,300 25,500 13,600 56,100 23,800 64,600 $188,700 $183,600 11,900 28,900 30,600 85,000 Vaughn Manufacturing Income Statement For the Year Ended December 31, 2017 $411,400 297,500 113,900 Sales revenue Cost of goods sold Gross profit Selling expenses Administrative expenses Income from operations Interest expense Income before income taxes Income tax expense Net income $30,600 10,200 40,800 73,100 5,100 68,000 13,600 $54,400 Additional data Depreciation expense was $29,750. Dividends declared and paid were $34,000. During the year equipment was sold for $14,450 cash. This equipment cost $30,600 originally and had accumulated depreciation of $16,150 at the time of sale. 1. 2. 3