Presented below are the financial statements of Rajesh Ltd.

                                    Rajesh Ltd.
                            Income Statement
            For the Year Ended December 31, 2020

Sales revenue................................................£242,000
Cost of goods sold .........................................175,000
Gross profit .......................................................67,000
Operating expenses ........................................24,000
Income from operations .................................43,000
Interest expense ...............................................3,000
Income before income taxes ........................40,000
Income tax expense .........................................8,000
Net income ...................................................£ 32,000

Additional data:
1. Depreciation expense is £13,300.
2. Dividends declared and paid were £20,000.
3. During the year, equipment was sold for £9,700 cash. This equipment cost £18,000 originally and had accumulated depreciation of £8,300 at the time of sale.

Instructions
a. Prepare a statement of cash flows using the indirect method.
b. Compute free cash flow.

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Rajesh Ltd. Comparative Statements of Financial Position December 31 Assets 2020 2019 £ 60,000 £ 78,000 Equipment Accumulated depreciation-equipment Inventory (29,000) 30,000 33,000 37,000 (24,000) 20,000 Accounts receivable 14,000 20,000 Cash Total £131,000 £108,000 Equity and Liabilities £ 18,000 £ 14,000 Share capital-ordinary Retained earnings Bonds payable Accounts payable Income taxes payable Total 50,000 38,000 33,000 27,000 29,000 15,000 7,000 8,000 £131,000 £108,000