Comparative financial statement data for Carmono Company follow:

For this year, the company reported net income as follows:

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 275
Cost of goods sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   150
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   125
Selling and administrative expenses . . . . . . . . . . . . . . .       90
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $ 35

This year Carmono declared and paid a cash dividend. There were no sales of property, plant, and equipment during this year. The company did not repurchase any of its own stock this year.

Required:

1. Using the indirect method, prepare a statement of cash flows for this year.

2. Compute Carmono’s free cash flow for this year.

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This Year Last Year Assets Cash and cash equivalents . $ 3 2$ .... Accounts receivable ... 22 24 Inventory .. 50 40 Total current assets ... 75 70 Property, plant, and equipment . Less accumulated depreciation 240 200 65 50 Net property, plant, and equipment 175 150 Total assets .. $250 $220 Liabilities and Stockholders' Equity Accounts payable.. $ 40 $ 36 Common stock 150 145 Retained earnings 60 39 Total liabilities and stockholders' equity $250 $220