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JOHNSTON COMPANY Comparative Balance Sheets December 31 Instructions (a) Prepare a statement of cash flows using the indirect method. (b) Compute free cash flow.

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JOHNSTON COMPANY Comparative Balance Sheets December 31 Instructions (a) Prepare a statement of cash flows using the indirect method. (b) Compute free cash flow. Assets 2022 2021 Cash 24,000 33,000 Accounts receivable 25,000 14,000 Inventory 41,000 25,000 Equipment 70,000 $78,000 Less: Accum depre-equip (27,000) 43,000 (24,000) Total 133,000 54,000 126,000 Working Papers (a) Liabilities & Stkhldrs' Equity Accounts payable Income taxes payable Bonds payable Common stock Retained earnings Total 31,000 43,000 24,000 20,000 20,000 10,000 25,000 25,000 33,000 28,000 133,000 126,000 JOHNSTON COMPANY Income Statement For the Year Ended December 31, 2022 Sales revenue $286,000 Cost of goods sold 204,000 Gross profit 82,000 Operating expenses 37,000 Income from operations 45,000 Interest expense 7,000 Income before income taxes 38,000 Income tax expense 10,000 Net income $ 28,000 Johnson Company Statement of Cash Flows For the Year Ended December 31, 2022 Cash flows from operating activities Net Income Adjustments to reconcile net income to net cash provided by operating activities Net cash provided by operating activities Cash flows from investing activities Net cash provided by operating activities Cash flows from financing activities Additional data: 1. Dividends of $23,000 were declared and paid. 2. During the year equipment was sold for $10,000 cash. This equipment cost $15,000 originally and had a book value of $10,000 at the time of sale. 3. All depreciation expense, $8,000, is in the operating expenses. 4. All sales and purchases are on account. 5. Additional equipment was purchased for $7,000 cash. Net cash provided by financing activities Net decrease in cash Cash at beginning of period Cash at end of period (b) "Free Cash Flows" (show your calculation)

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