Waterways prepared the balance sheet and imcome statement for the irrigation installation division for 2020. Now the company also needs to prepare a statement of cash flows for the same division. The comparative balance sheets for Waterways Corporation's irrigation installation division for the years 2019 and 2020 and the income statement for the year 2020 are presented below.

Additional information:

1. Waterways sold a company vehicle for $24,000. The vehicle had been used for 10 years. It cost $80,200 when purchased and had a 10-year life and a $5,900 salvage value. Straight-line depreciation was used.

2. Waterways purchased with cash new equipment costing $208,800.

3. Prepaid expenses increased by $32,900. All changes in accounts payable relate to inventory purchases.

a.) Prepare a statement of cash flows using the direct method for the year 2020.

c.) Determine free cash flow for the year 2020.

WATERWAYS CORPORATION-INSTALLATION DIVISION Balance Sheets December 31 Assets 2020 2019 Current assets Cash $831,600 $750,700 Accounts receivable 684,300 542,100 Work in process 699,700 Inventory 17,000 7,400 Prepaid expenses 75,900 43,000 Total current assets 2,308,500 1,343,200 Property, plant, and equipment Land 300,000 300,000 Buildings 451,000 451,000 Equipment 928,600 800,000 Furnishings 40,600 40,600 Accumulated depreciation (479,500) (480,700) Total property, plant, and equipment 1,240,700 1,110,900 $3,549,200 $2,454,100 Liabilities and Stockholders' Equity Current liabilities Accounts payable $157,000 $127,600 Income taxes payable 100,900 79,700 Wages payable 4,600 2,000 Interest payable 1,200 Other current liabilities 14,700 15,300 Revolving bank loan payable 15,200 Total current liabilities 293,600 224,600 Total assets JAVO 928,600 40,600 (479,500) 1,240,700 $3,549,200 YJETO 800,000 40,600 (480,700) 1,110,900 $2,454,100 $127,600 79,700 2,000 Equipment Furnishings Accumulated depreciation Total property, plant, and equipment Total assets Liabilities and Stockholders' Equity Current liabilities Accounts payable Income taxes payable Wages payable Interest payable Other current liabilities Revolving bank loan payable Total current liabilities Long-term liabilities Note payable Total liabilities Stockholders' equity Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $157,000 100,900 4,600 1,200 14,700 15,200 293,600 15,300 224,600 138,000 431,600 224,600 1,250,000 1,867,600 3,117,600 $3,549,200 1,250,000 979,500 2,229,500 $2,454,100 WATERWAYS CORPORATION-INSTALLATION DIVISION Income Statement For the Year Ending December 31, 2020 Sales $5,500,914 Less: Cost of goods sold 3,108,200 A Total liabilities and stockholders' equity $3,549,200 $2,454,100 WATERWAYS CORPORATION-INSTALLATION DIVISION Income Statement For the Year Ending December 31, 2020 Sales $5,500,914 Less: Cost of goods sold 3,108,200 Gross profit 2,392,714 Operating expenses Advertising $49,500 Insurance 397,200 Salaries and wages 589,000 Depreciation 73,100 Other operating expenses 21,100 Total operating expenses 1,129,900 Income from operations 1,262,814 Other income Gain on sale of equipment 18,100 Other expenses Interest expense (12,200) Net other income and expenses 5,900 Income before income tax 1,268,714 Income tax expense 380,614 Net income $888,100 (a) Prepare a statement of cash flows using the indirect method for the year 2020. (Show am (15,000).) WATERWAYS CORPORATION-Installation Division Statement of Cash Flows-Indirect Method