Problem 3. Prepare a statement of cash flows--indirect method Presented below are the financial statements of Warner Company. WARNER COMPANY Comparative Balance Sheet December 31 Assets 2022 2023 Cash $35,000 $20,000 Accounts receivable 20,000 14,000 (6,000) Inventory 28,000 20,000 (8,000) Property, plant, and equipment 60,000 78,000 Accumulated depreciation (32,000) (24,000) Total $111,000 $108,000 Liabilities and Stockholders' Equity Accounts payable $19,000 $15,000 (4,000) Income taxes payable 7,000 8,000 1,000 Bonds payable 17,000 33,000 Common stock 18,000 14,000 Retained earnings 50,000 38,000 Total $111,000 $108,000 WARNER COMPANY Income Statement For the Year Ended December 31, 2022 Sales Revenue Cost of goods sold Gross profit Selling expenses Administrative expenses Income from operations Interest expense Income before income taxes Income tax expense Net income Additional data: 1. Depreciation expense was $17,500. 2. Dividends declared and paid were $20,000. $242,000 175,000 67,000 $18,000 6,000 24,000 43,000 3,000 40,000 8,000 $32,000 + (a) Prepare a statement of cash flows using the indirect method. Cash from operating activities Net income operating activities: Adjustments to reconcile net income provided by 32,000 Depreciation expense 17,500 Decrease in Accounts receivable 6,000 Decrease in Inventory 8,000 Decrease in Accounts Payable (4,000) Increase in income taxes payable 1,000 28,500 Net cash provided by operating activities 60,500 Cash flow from investing activities Sale of equipment 8,500 Net cash used by investing activities 8,500 Cash flow from financing activities Sale of Common Stock Payment of Dividends Net cash provided/used by Financing Activities Net decrease in cash Cash at beginning period Cash at the end of period b) Compute free cash flow. 15,000 35,000 20,000