Sales Revenue $242,000

Cost of Goods Sold $175,000

Gross Profit $67,000

Operating expenses $24,000

Interest Expense $3,000

Interest before Income tax $40,000

Income tax expense $8,000

Net Income $32,000

Dividends declared and paid were $20,000

During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of &8,500 at the time of Sale.

All depreciation expense $14,500, is in the operating expenses.

All sales and purchases are on account.

Prepare a statement of cash flows using the indirect method.

Compute free cash flow.

Assets 2014 2013

Cash 38,000 20,000

Accounts receivable 30,000 14,000

Inventory 27,000 20,000

Equipment 60,000 78,888

(Accumulated Dep. (29,000) (24,000)

Total 126,000 108,000

Liabilities

Accounts Payable 24,000 15,000

Income Taxes Payable 7,000 8,000

Bonds Payable 27,000 33,000

Common Stock 18,000 14,000

Retained earnings 50,000 38,000

Total 126,000 108,000