Question 1.

Gushi Corporation's comparative balance sheets are presented below.

GUSHI CORPORATION

Comparative Balance Sheets

December 31

2020 2019

Cash $ 21,570 $ 10,700

Accounts receivable 18,200 23,400

Land 18,000 26,000

Building 70,000 70,000

Accumulated depreciation (15,000) (10,000)

Total $112,770 $120,100

Accounts payable $ 12,370 $31,100

Common stock 75,000 69,000

Retained earnings 25,400 20,000

Total $112,770 $120,100

Additional information:

1. Net income was $27,900. Dividends declared and paid were $22,500.

2. All other changes in noncurrent account balances had a direct effect on cash flows, except the change in accumulated depreciation. The land was sold for $5,900.

Instruction

(a) Prepare a statement of cash flows for 2020 using the indirect method.

(b) Compute free cash flow.