Data for Rocastle plc are presented in P13-7B. Further analysis reveals the following.

ROCASTLE plc
Income Statement
For the Year Ended December 31, 2017
Sales revenue.....................................‚¬286,000
Cost of goods sold.................................204,000
Gross profit..........................................82,000
Operating expenses.................................37,000
Income from operations............................45,000
Interest expense.......................................7,000
Income before income taxes.......................38,000
Income tax expense.................................10,000
Net income........................................‚¬ 28,000
1. Accounts payable pertains to merchandise creditors.
2. All operating expenses except for depreciation are 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 using the direct method.
(b) Compute free cash flow.

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ROCASTLE plc Comparative Statements of Financial Position December 31 Assets 2017 2016 70,000 Equipment Accumulated depreciation- 78,000 (27,000) 43,000 45,000 25,000 18,000 131,000 equipment Inventory Accounts receivable Cash (24,000)54,000 25,000 14,000 33,000 126,000 Total Equity and Liabilities Share capital-ordinary Retained earnings Bonds payable Accounts payable Income taxes payabl 25,000 31,000 20,000 31,000 24,000 131,000 25,000 28,000 10,000 43,000 20,000 126,000 Total