Northern Illinois Manufacturing prepared the balance sheet and income statement for this

year. Now the company needs to prepare its statement of cash flow. The comparative

balance sheets for Northern Illinois Manufacturing for this year and last year and the

income statement for this year are presented below. $($Note: Work in Process is a current

asset and should be treated as any other current asset.$)$

Additional information:

$1.$ Northern Illinois Manufacturing sold a piece of company equipment for $$24,000.$ The

equipment had been used for ten years. It had cost $$80,000$ when purchased and had a $10-$

years life and a $$6,000$ salvage value. Straight$-$line depreciation was used.

$2.$ Northern Illinois Manufacturing purchased new equipment costing $$209,200.$

$3.$ The company paid $$50,000$ in dividends.

Northern Illinois Manufacturing

Income Statement

For the year ending December $31$

Sales $$5,536,077$

Less: Cost of goods sold $3,132,777$

Gross Profit $2,403,300$

Operating expenses:

Advertising $$50,000$

Insurance $400,000$

Salaries and wages $584,640$

Depreciation $71,319$

Other op expenses $21,200$

Total operating

expenses $1,127,159$

Income from operations $1,276,141$

Other income

Gain on sale of equip $18,000$

Other expenses

Interest expense $(12,187)$

Net other income and expenses $5,813$

Income before income

tax $1,281,954$

Income tax expenses $384,586$

Net income $$897,368$

Northern Illinois Manufacturing

Balance Sheet

December $31$

Assets This Year Last Year

Current assets

Cash $$786,797$ $$746,681$

Accounts receivable $680,750542,685$

Work in process $702,1590$

Inventory $16,7667,500$

Prepaid expenses $76,55042,590$

Total current assets $2,263,0221,339,456$

Property, plant, and equipment

Furnishings $40,41640,416$

Equipment $929,400800,200$

Buildings $450,000450,000$

Land $300,000300,000$

Accumulated depreciation $(482,523)(485,204)$

Total property, plant, and

equipment $1,237,2931,105,412$

Total Assets $$3,500,315$ $$2,444,868$

Liabilities and Stockholders'

Equity

Current liabilities

Accounts payable $$157,095$ $$128,360$

Income taxes payable $101,34479,989$

Wages payable $4,5171,984$

Interest payable $1,1870$

Other current liabilities $14,51515,246$

Revolving bank loan payable $15,0000$

Total current liabilities $293,658225,579$

Long$-$term liabilities

Notes payable $140,0000$

Total liabilities $433,658225,579$

Stockholders' equity

Common stock $1,250,0001,250,000$

Retained earnings $1,816,657969,289$

Total stockholders' equity $3,066,6572,219,289$

Total liabilities and stockholders'

equity $$3,500,315$ $$2,444,868$

Instructions:

The assignment must be completed in an Excel spreadsheet and include the following:

a$.$ Prepare a statement of cash flow using the indirect method for this year.

b$.$ Determine free cash flow.