17-7A Prepare a statement of cash flows - indirect method, and compute free cash flow. The following are the financial statements of Nosker Company. NOSKER COMPANY Comparative Balance Sheet December 31 2017 2016 Assets Cash $38,000 $20,000 Accounts Receivable 30,000 14,000 Inventory 27,000 20,000 Equipment 60,000 78,000 Accumulated depreciation--equipment (29,000) (24,000) Total $126,000 $108,000 Liabilities and Stockholders' Equity Accounts payable $24,000 $15,000 Income taxes payable 7,000 8,000 Bonds payable 27,000 33,000 Common stock 18,000 14,000 Retained earnings 50,000 38,000 Total $126,000 $108,000 NOSKER COMPANY Income Statement For the Year ended December 31, 2017 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. Dividends declared and paid were $20,000. 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 cash flow. NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" . (a) NOSKER COMPANY Statement of Cash Flows For the Year Ended December 31, 2017 Cash flows from operating activities Net income Value Adjustments to reconcile net income to net cash provided by operating activities Depreciation expense Value Increase in accounts receivable Value Increase in inventory Value Increase in accounts payable Value Decrease in income taxes payable Value ? Net cash provided by operating activities ? Cash flows from investing activities Sale of equipment Value Net cash provided by investing activities Value Cash flows from financing activities Issuance of common stock Value Redemption of bonds Value Payment of dividends Value Net cash used by financing activities ? Net increase in cash ? Cash at beginning of period Value Cash at end of period ? (b) Free Cash Flow: Net cash provided by operating activities Value Less: Capital expenditures Value Cash dividends Value ? ? After you have completed the requirements of P17-7A, consider the additional question. Answers are on the other tab in this file. 1. Assume that depreciation changed to $17,500 and that asset was sold for $11,500 cash. Also assume that the book value of the asset at the time of sale was also $11,500. Show the impact of these changes on the statement of cash flows and free cash flow.