Data for Rajesh Company Ltd. are presented in P13-7A. Further analysis reveals the following.

RAJESH COMPANY LTD.
Income Statement
For the Year Ended December 31, 2017
Sales revenue........................................£242,000
Cost of goods sold....................................175,000
Gross profit.............................................67,000
Operating expenses....................................24,000
Income from operations...............................43,000
Interest expense..........................................3,000
Income before income taxes..........................40,000
Income tax expense......................................8,000
Net income............................................£ 32,000
1. Accounts payable pertain to merchandise suppliers.
2. All operating expenses except for depreciation were paid in cash.
3. All depreciation expense is in the operating expenses.
4. All sales and purchases are on account.
Instructions
(a) Prepare a statement of cash flows for Rajesh using the direct method.
(b) Compute free cash flow.

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RAJESH COMPANY LTD Comparative Statements of Financial Position December 31 Assets Equipment Accumulated depreciation-equipment Inventory Accounts receivable Cash 2017 2016 E 60,000 (29,000) 30,000 33,000 37,000 £131,000 £ 78,000 (24,000) 20,000 14,000 20,000 £108,000 Total Equity and Liabilities Share capital-ordinary Retained earnings Bonds payable Accounts payable Income taxes payable £ 18,000 50,000 27,000 29,000 7,000 £131,000 £ 14,000 38,000 33,000 15,000 8,000 £108,000 Total