The purpose of this assessment is to prepare the statement of cash flows and understand the impact of cash flow on the financial health of an organization.

The comparative balance sheet of Morston Educational Supply at December 31, 2016, reported the following:

	2016	2015
Current Assets:
Cash	$85,400	21,500
Accounts Receivable	14,800	$21,500
Merchandise Inventory	63,000	59,400
Current Liabilities:
Accounts Payable	$27,100	$26,100
Accrued Liabilities	10,400	10,900

Morstons transactions during 2016 included the following:

Payment of cash dividends	$20,200	Depreciation expense	$17,000
Purchase of equipment with cash	55,100	Purchase of building with cash	102,000
Issuance of long-term notes payable to borrow cash	47,000	Net income	59,600
Issuance of common stock for cash	114,000

Based on the given data, complete the following tasks:

1. Prepare Morstons statement of cash flows for the year ended December 31, 2016. Use the indirect method to report cash flows from operating activities.

2. Evaluate Morstons cash flows for the year. Mention all three categories of cash flows, and give the reason for your evaluation.

3. If Morston plans similar activity for 2017, what is its expected free cash flow?