Question

Comparative financial statement data for Carmono Company follow:

	This Year			Last Year
Assets
Cash	$	18.00		$	35.00
Accounts receivable		92.00			85.00
Inventory		145.00			133.80
Total current assets		255.00			253.80
Property, plant, and equipment		294.00			236.00
Less accumulated depreciation		62.40			46.80
Net property, plant, and equipment		231.60			189.20
Total assets	$	486.60		$	443.00
Liabilities and Stockholders’ Equity
Accounts payable	$	87.00		$	67.00
Common stock		202.00			154.00
Retained earnings		197.60			222.00
Total liabilities and stockholders’ equity	$	486.60		$	443.00

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

Sales	$	1,900.00
Cost of goods sold		1,140.00
Gross margin		760.00
Selling and administrative expenses		740.00
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