Additional data:

1. Depreciation expense was $6,000.

2. Dividends of $25,000 were declared and paid.

3. During the year, equipment was sold for $12,000 cash. This equipment cost $15,000

originally and had accumulated depreciation of $3,000 at the time of sale.

4. Additional equipment was purchased for $7,000 cash.

Instructions

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

(b) Compute free cash flow.

Rocastle Company Comparative Balance Sheets December 31 2017 2016 Assets 18,000 33.000 Cash 14,000 Accounts receivable 25,000 Inventory 45,000 25,000 70,000 78,000 Equipment Accumulated depreciation- (27,000) 43,000 024,000) 54,000 equipment Total 131 000 $126,000 Liabilities and Stockholders' Equity 31,000 Accounts payable 43.000 taxes payable Bonds payable 24,000 20,000 10,000 20,000 Common stock 25,000 25,000 Retained eamings 31,000 28,000 Total $131,000 $126,000 Rocastle Company Income Statement For the Year Ended December 31, 2017 Sales revenue $286,000 Cost of goods sold 204,000 Gross profit 82,000 operating expenses 37,000 45,000 Income from operations Interest expense 7,000 Income before income taxes 38,000 Income tax expense 10,000 28,000 Net income comptde free cash flow. (LO 2, 3), AP, AN