Question

Comparative financial statement data for Carmono Company follow:

	This Year			Last Year
Assets
Cash	$	12.00		$	23.00
Accounts receivable		68.00			61.00
Inventory		115.00			102.60
Total current assets		195.00			186.60
Property, plant, and equipment		258.00			212.00
Less accumulated depreciation		52.80			39.60
Net property, plant, and equipment		205.20			172.40
Total assets	$	400.20		$	359.00
Liabilities and Stockholders’ Equity
Accounts payable	$	69.00		$	55.00
Common stock		154.00			118.00
Retained earnings		177.20			186.00
Total liabilities and stockholders’ equity	$	400.20		$	359.00

For this year, the company reported net income as follows:

Sales	$	1,300.00
Cost of goods sold		780.00
Gross margin		520.00
Selling and administrative expenses		500.00
Net income	$	20.00

This year Carmono declared and paid a cash dividend. There were no sales of property, plant, and equipment during this year. The company did not repurchase any of its own stock this year.

Required:

1. Using the indirect method, prepare a statement of cash flows for this year.

2. Compute Carmono’s free cash flow for this year.

Answer 1