Exercise 13-6 Prepare a Statement of Cash Flows; Free Cash Flow [LO13-1, LO13-2, LO13-3]

Comparative financial statement data for Carmono Company follow:

	This Year			Last Year
Assets
Cash and cash equivalents	$	3		$	6
Accounts receivable		22			24
Inventory		50			40
Total current assets		75			70
Property, plant, and equipment		240			200
Less accumulated depreciation		65			50
Net property, plant, and equipment		175			150
Total assets	$	250		$	220
Liabilities and Stockholders Equity
Accounts payable	$	40		$	36
Common stock		150			145
Retained earnings		60			39
Total liabilities and stockholders equity	$	250		$	220

For this year, the company reported net income as follows:

Sales	$	275
Cost of goods sold		150
Gross margin		125
Selling and administrative expenses		90
Net income	$	35

This year Carmono declared and paid a cash dividend. There were no sales of property, plant, and equipment during this year. The company did not repurchase any of its own stock this year.

Required:

1. Using the indirect method, prepare a statement of cash flows for this year.

2. Compute Carmonos free cash flow for this year.