Problem - Presented below are the financial statements of Rajesh Company.
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Rajesh Company Comparative Balance Sheets December 31
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Assets
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2014
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2013
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Cash
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$37,000
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$20,000
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Accounts receivable
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33,000
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14,000
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Inventory
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30,000
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20,000
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Equipment
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60,000
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78,000
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Accumulated depreciation-equipment
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(29,000)
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(24,000)
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Total
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$131,000
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$108,000
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Liabilities and Stockholders' Equity
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Accounts payable
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$29,000
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$ 15,000
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Income taxes payable
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7,000
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8,000
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Bonds payable
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27,000
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33,000
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Common stock
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18,000
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14,000
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Retained earnings
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50,000
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38,000
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Total
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$131,000
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$108,000
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Rajesh Company Income Statement For the Year Ended December 31, 2014
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Sales revenue
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$242,000
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Cost of goods sold
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175,000
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Gross profit
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67,000
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Operating expenses
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24,000
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Income from operations
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43,000
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Interest expense
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3,000
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Income before income taxes
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40,000
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Income tax expense
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8,000
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Net income
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$32,000
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Additional data:
1. Depreciation expense is 13,300.
2. Dividends declared and paid were $20,000.
3. During the year equipment was sold for $9,700 cash. This equipment cost $18,000 originally and had accumulated depreciation of $8,300 at the time of sale.
(a) Prepare a statement of cash flows using the indirect method.
(b) Compute free cash flow.