Presented below are the financial statements of Nosker Company.
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NOSKER COMPANY Comparative Balance Sheets December 31 |
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Assets |
2014 |
2013 |
|
Cash |
$ 38,000 |
$ 20,000 |
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Accounts receivable |
30,000 |
14,000 |
|
Inventory |
27,000 |
20,000 |
|
Equipment |
60,000 |
78,000 |
|
Accumulated depreciation—equipment |
(29,000) |
(24,000) |
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Total |
$126,000 |
$108,000 |
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Liabilities and Stockholders” Equity |
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|
Accounts payable |
$ 24,000 |
$ 15,000 |
|
Income taxes payable |
7,000 |
8,000 |
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Bonds payable |
27,000 |
33,000 |
|
Common stock |
18,000 |
14,000 |
|
Retained earnings |
50,000 |
38,000 |
|
Total |
$126,000 |
$108,000 |
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NOSKER COMPANY Income Statement For the Year Ended December 31, 2014 |
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Sales revenue |
$242,000 |
|
Cost of goods sold |
175,000 |
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Gross profit |
67,000 |
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Operating expenses |
24,000 |
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Income from operations |
43,000 |
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Interest expense |
3,000 |
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Income before income taxes |
40,000 |
|
Income tax expense |
8,000 |
|
Net income |
$ 32,000 |
Additional data:
- Dividends declared and paid were $20,000.
- During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.
- All depreciation expense, $14,500, is in the operating expenses.
- All sales and purchases are on account.
Instructions
(a)Prepare a statement of cash flows using the indirect method.
(b)Compute free cash flow.