Presented below and on the next page are the financial statements of Cheaney Company.

Additional data:
1. Dividends declared and paid were $25,000.
2. During the year equipment was sold for $8,500 cash. This equipment cost $18,000 originally and had a book value of $8,500 at the time of sale.
3. All depreciation expense, $14,500, is in the operating expenses.
4. All sales and purchases are on account.

Instructions
(a) Prepare a statement of cash flows using the indirect method.
(b) Compute free cashflow.

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CHEANEY COMPANY Comparative Balance Sheets December 31 Assets Cash Accounts receivable Merchandise inventory Property, plant, and equipment Accumulated depreciation 2011 2010 35,000 20,000 14,000 20,000 78,000 33,000 27,000 60,000 (29,000) (24,000) Total 126000 $108,000 Liabilities and Stockholders' Equity Accounts payable Income taxes payable Bonds payable Common stock Retained earnings 29,000 15,000 8,000 33,000 14,000 38,000 $126,000 $108,000 7,000 27,000 18,000 45,000 Total CHEANEY COMPANY Income Statement For the Year Ended December 31, 2011 Sales Cost of goods sold Gross profit Operating expenses Income from operations Interest expense Income before income taxes Income tax expense Net income $242,000 175,000 67,000 24,000 43,000 3,000 40,000 8,000 S 32,000