Consider the following comparative balance sheets for the Liquidity Company:

The company paid a dividend of $150,000 during 2012 and there were no equity contributions or stock repurchases.
a. Calculate free cash flow generated during 2012.
b. Where did the increase in cash come from?
c. How would your calculation in part (a) change if the firm invested in short-term deposits rather than paying a dividend?

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December 31 2012 2011 $ 435,000 40,000 100,000 400,000 Operating cash Accounts receivable Inventories 50,000 -0- -0- 800,000 200,000 Land (unamortized cost) Plant assets 200,000 (100,000) 1,075,000 Less: accumulated depreciation -0- 1,050,000 Accounts payable Capital stock 25,000 1,050,000 $1,075,000 -0- 1,050,000 $1,050,000