Presented below are the financial statements of Rocastle 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.

ROCASTLE COMPANY Comparative Balance Sheets December 31 2012 2011 Assets $ 24,000 $ 33,000 Cash Accounts receivable 25.000 14,000 Inventory Equipment Less: Accumulated depreciation- equipment 41.000 25.000 $ 70,000 $ 78,000 (27.000) 54,000 43.000 (24,000) $133.000 Total $126.000 Liabilities and Stockholders' Equity $ 31,000 $ 43,000 Accounts payable Income taxes payable Bonds payable 24.000 20.000 20,000 10,000 Common stock 25,000 25,000 Retained earnings 33.000 28.000 $133.000 $126,000 Total ROCASTLE COMPANY Income Statement For the Year Ended December 31, 2012 Sales revenue $286,000 Cost of goods sold 204,000 Gross profit Operating expenses 82,000 37,000 Income from operations Interest expense 45,000 7,000 Income before income taxes 38,000 Income tax expense 10,000 $ 28,000 Net income