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Northern Illinois Manufacturing prepared the balance sheet and income statement for this year. Now the company needs to prepare its statement of cash flows. The

Northern Illinois Manufacturing prepared the balance sheet and income statement for this year. Now the company needs to prepare its statement of cash flows. The comparative balance sheets for Northern Illinois Manufacturing for this year and last year and the income statement for this year are presented below. (Note: Work in Process is a current asset and should be treated as any other current asset.

Additional information:

1. Norther Illinois Manufacturing sold a piece of company equipment for $30,000. The equipment had been used for six years. It had cost $100,000 when purchases and had a 10-years life and a $10,000 salvage value. Straight-line depreciation was used.

2. Northern Illinois manufacturing purchased new equipment costing $200,000.

3. The company paid $100,000 in dividends.

Northern Illinois Manufacturing

Income Statement

For the year ending December 31

Sales

$5,536,077

Less: Cost of goods sold

3,132,777

Gross Profit

2,403,300

Operating expenses:

Advertising

$52,000

Insurance

382,000

Salaries and wages

594,650

Depreciation

72,500

Other op. expenses

30,500

Total op. expenses

1,131,650

Income from operations

1,271,650

Other income

Loss on sale of equip

(16,000)

Other expenses

Interest expense

(12,200)

Net other income and expenses

(28,200)

Income before income tax

1,243,450

Income tax expenses

373,035

Net income

$870,415

Northern Illinois Manufacturing

Balance Sheet

December 31

Assets

This Year

Last Year

Current assets

Cash

$792,306

$746,681

Accounts receivable

680,750

542,685

Work in process

680,450

0

Inventory

16,750

7,500

Prepaid expenses

71,500

42,590

Total current assets

2,241,756

1,339,456

Property, plant, and equipment

Furnishings

40,416

40,416

Equipment

900,200

800,200

Buildings

450,000

450,000

Land

300,000

300,000

Accumulated depreciation

(503,704)

(485,204)

Total property, plant, and

equipment

1,186,912

1,105,412

Total Assets

$3,428,668

$2,444,868

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$156,300

$128,360

Income taxes payable

100,344

79,989

Wages payable

600

1,984

Interest payable

1,200

0

Other current liabilities

14,520

15,246

Revolving bank loan payable

16,000

0

Total current liabilities

288,964

225,579

Long-term liabilities

Notes payable

150,000

0

Total liabilities

438,964

225,579

Stockholders' equity

Common stock

1,250,000

1,250,000

Retained earnings

1,739,704

969,289

Total stockholders' equity

2,989,704

2,219,289

Total liabilities and stockholders' equity

$3,428,668

$2,444,868

Instructions:

This assignment must be completed in an Excel spreadsheet and include the following:

a. Prepare a statement of cash flows using the indirect method for this year.

b. Determine free cash flow.

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