The comparative balance sheet of Morgensen Educational Supply at December 31, 2012, reported the following:

Morgensen's transactions during 2012 included the following:

Requirements
1. Prepare the statement of cash flows of Morgensen Educational Supply for the year ended December 31, 2012. Use the indirect method to report cash flows from operating activities.
2. Evaluate Morgensen's cash flows for the year. Mention all three categories of cash flows and give the reason for your evaluation.
3. If Morgensen plans similar activity for 2013, what is its expected free cashflow?

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December 31, 2012 2011 Current assets: $ 89,600 $ 24,500 Cash and cash cquivalents Accounts receivable 14,500 21,900 Inventories .. 62,800 60,000 Current liabilities: Accounts payable. Accrued liabilities. 27,600 30,100 11,100 11,600