JANG COMPANY Income Statement For the Year Ended December 31, 2011 Sales $281,000 Cost of goods sold 204,000 Gross profit 77,000 Selling expenses $28,000 Administrative expenses 9,000 37,000 Income from operations 40,000 Interest expense 5,000 Income before income taxes 35,000 Income tax expense Net income 10,000 $ 25,000 Additional data: 1. Dividends of $20,000 were declared and paid. 2. During the year equipment was sold for $12,000 cash. This equipment cost $15,000 originally and had a book value of $12,000 at the time of sale. 3. All depreciation expense, $5,000, is in the selling expense category. 4. All sales and purchases are on account. 5. Additional equipment was purchased for $6,000 cash. Instructions (a) Prepare a statement of cash flows using the indirect method. (b) Compute free cash flow