Portland Merchantile, December 31, 20XX 1a) Create a cash flow statement in good form. 1) Use the following income statement, retained earnings statement, and balance sheet to prepare a cash flow statement for the current year. Income Statement Reven Current Ye. $875.000 $524,000 $351,000 Cost of Goods Sold Gross Profit Administrative Expenses: Rent Expense Wages Expense Depreciation Expense Loss on Sale of Factory Machine Total Expenses Net Income $100,000 $125,000 $33,000 $4,000 $262.000 $89,000 Retained Earnings Statement Beginning Retained Earnings Add Net Income (Subtract Loss) Less Dividends Paid Ending Retained Earnings Current Yr. $175,000 $89,000 ($50,000) $214,000 Current Yr. Prior Yr. Balance Sheet Assets Cash Accounts Receivable Inventory Total Current Assets Factory Machines Less Accumulated Depreciation Buildings Less Accumulated Depreciation Total Assets $86,000 $40,000 $80,000 $45,000 $223,000 $180,000 $389,000 $265,000 $210,000 $200,000 ($200,000) ($195,000) $800,000 $800,000 ($280,000) ($260,000) $919.000 $810,000 Liabilities Accounts Payable Taxes Payable Short-Term Notes Payable Total Current Liabilities Long-Term Notes Payable Bonds Payable (due in 8 yrs) Total Liabilities $120,000 $10,000 $25,000 $155,000 $100,000 $250,000 $505,000 $110,000 $25,000 $45,000 $180,000 $40,000 $285,000 $505,000 Stockholder's Equity Common Stock Retained Earnings Total Stockholder's Equity Total Liabilities and Stockholder's Equity $200,000 $214,000 $414,000 $919,000 $130,000 $175,000 $305,000 $810,000 Note 1) Portland Merchantile (PM) purchased $25.000 of factory equipment for cash Note 2) During thre year PM also sold factory equipment with an original cost of $15,000 and related Accumulated Depreciation in the amount of $8,000 for $3,000 cash. 1b) What is the most important number on the cash flow statement? Why? 1c) What is the Free Cash Flow amount? 1d) What does Free Cash Flow indicate