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

Morston€™s transactions during 2016 included the following:

Requirements
1. Prepare the statement of cash flows of Morston Educational Supply for the year ended December 31, 2016. Use the indirect method to report cash flows from operating activities.
2. Evaluate Morston€™s 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?

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2016 2015 Current Assets: Cash Accounts Receivable Merchandise inventory 85,400 21,500 14,800 21,500 63,000 59,400 Current Liabilities: Accounts Payable Accrued Liabilities 27,100 26,100 10,400 10,900 s 20,200 Payment of cash dividends Purchase of equipment with cash Issuance of long-term notes payable to borrow cash Issuance of common stock for cash 55,100 47,000 Net income 14,000 Depreciation expense Purchase of building with cash S 17,000 102,000 59,600