Presented below are the financial statements of Ortega Company.

Additional data:1. Dividends of $23,000 were declared and paid.2. During the year equipment was sold for $10,000 cash. This equipment cost $15,000 originally and had a book value of $10,000 at the time of sale.3. All depreciation expense, $8,000, is in the operating expenses.4. All sales and purchases are on account.5. Additional equipment was purchased for $7,000 cash.Instructions(a) Prepare a statement of cash flows using the indirect method.(b) Compute free cash flow.

ORTEGA COMPANY Comparative Balance Sheets December 31 Assets 2010 2009 $ 24,000 $ 33,000 14,000 25,000 Cash Accounts receivable 25,000 41,000 Merchandise inventory Property, plant, and equipment Less: Accumulated depreciation $ 70,000 (27,000) $ 78,000 (24,000) 43,000 54,000 $133,000 $126,000 Total Liabilities and Stockholders' Equity $ 31,000 24,000 $ 43,000 Accounts payable Income taxes payable Bonds payable 20,000 20,000 10,000 25,000 33,000 Common stock 25,000 Retained earnings 28,000 $133,000 $126,000 Total ORTEGA COMPANY Income Statement For the Year Ended December 31, 2010 $286,000 Sales Cost of goods sold 204,000 82,000 Gross profit Operating expenses 37,000 Income from operations Interest expense 45,000 7,000 Income before income taxes 38,000 10,000 Income tax expense $ 28,000 Net income