a. Prepare a Statement of Cash Flows

b. Determine Free Cash Flow

ABC COMPANY Comparative Balance Sheet December 31 2018 2017 Assets Cash Accounts Receivable Inventory Equipment Accumulated depreciation-equipment $38,000 30,000 27,000 60,000 (29,000) $126,000 $20,000 14,000 20,000 78,000 (24,000) Total $24,000 7,000 27,000 18,000 50,000 $126,000 $15,000 8,000 33,000 14,000 38,000 Accounts payable Income taxes payable Bonds payable Common stock Retained earnings Total ABC COMPANY Income Statement For the Year ended December 31, 2018 $242,000 175,000 67,000 24,000 43,000 3,000 40,000 8,000 $32,000 Sales revenue Cost of goods sold Gross profit Operating expenses Income from operations Interest expense Income before income taxes Income tax expense Net income Additional data: 1. Dividends declared and paid were $25,000 2. During the year equipment was sold for $9,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale 3. All depreciation expense, $15,500, is in the operating expenses 4. All sales and purchases are on account. Instructions (a) Prepare a statement of cash flows using the indirect method (b) Compute free cash flow ABC COMPANY Comparative Balance Sheet December 31 2018 2017 Assets Cash Accounts Receivable Inventory Equipment Accumulated depreciation-equipment $38,000 30,000 27,000 60,000 (29,000) $126,000 $20,000 14,000 20,000 78,000 (24,000) Total $24,000 7,000 27,000 18,000 50,000 $126,000 $15,000 8,000 33,000 14,000 38,000 Accounts payable Income taxes payable Bonds payable Common stock Retained earnings Total ABC COMPANY Income Statement For the Year ended December 31, 2018 $242,000 175,000 67,000 24,000 43,000 3,000 40,000 8,000 $32,000 Sales revenue Cost of goods sold Gross profit Operating expenses Income from operations Interest expense Income before income taxes Income tax expense Net income Additional data: 1. Dividends declared and paid were $25,000 2. During the year equipment was sold for $9,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale 3. All depreciation expense, $15,500, is in the operating expenses 4. All sales and purchases are on account. Instructions (a) Prepare a statement of cash flows using the indirect method (b) Compute free cash flow