Exercise 14-3 Calculating Free Cash Flow Special instructions: The equation for Free Cash Flow is found on page 703 of your text. Complete this exercise on this document. There is space after the requirement. Apex Company prepared the statement of cash flows for the current year that is shown below: Apex Company Statement of Cash FlowsIndirect Method Operating activities Net income $40,000 Adjustments to convert net income to cash basis: Depreciation $22,000 Increase in accounts receivable (60,000) Increase in inventory (25,000) Decrease in prepaid expenses 9,000 Increase in accounts payable 55,000 Decrease in accrued liabilities (12,000) Increase in income taxes payable 5,000 (6,000) Net cash provided by (used in) operating activities 34,000 Investing activities Proceeds from the sale of equipment 14,000 Loan to Thomas Company (40,000) Additions to plant and equipment (110,000 )

Net cash provided by (used in) investing activities (136,000) Financing activities Increase in bonds payable 90,000 Increase in common stock 40,000 Cash dividends (30,000) Net cash provided by (used in) financing activities 100,000 Net decrease in cash and cash equivalents (2,000) Beginning cash and cash equivalents 27,000

Ending cash and cash equivalents $25,000 Required: Compute Apex Companys free cash flow for the current year.