$P12\mathrm{.}7(LO2,3),AP$ Presented here are the financial statements $of$ Warner Company.

Warner Company

Comparative Balance Sheets

December $31$

$20272026$

Assets

Cash $ $35,000$ $ $20,000$

Accounts receivable $20,00014,000$

Inventory $28,00020,000$

Property, plant, and equipment $60,00078,000$

Accumulated depreciation $(32,000)(24,000)$

Total $$111,000$ $$108,000$

Liabilities and Stockholders$$ Equity

Accounts payable $ $19,000$ $ $15,000$

Income taxes payable $7,0008,000$

Bonds payable $17,00033,000$

Common stock $18,00014,000$

Retained earnings $50,00038,000$

Total $$111,000$ $$108,000$

Warner Company

Income Statement

For the Year Ended December $31,2027$

Sales revenue $$242,000$

Cost $of$ goods sold $175,000$

Gross profit $67,000$

Selling expenses $$18,000$

Administrative expenses $6,00024,000$

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 was $$17,500.$

$2.$ Dividends declared and paid were $$20,000.$

$3.$ During the year, equipment was sold for $$8,500$ cash. This equipment originally cost $$18,000$ and had accumulated depreciation $of$ $$9,500at$ the time $of$ sale.

$4.$ Bonds were redeemed $at$ their carrying value.

$5.$ Common stock was issued $at$ par for cash.

Instructions:

$-$ Prepare a statement $of$ cash flows using the indirect method.

$-a.$ Net cash provided$-$oper. act. $$38,500$

$-$ Compute free cash flow.

Prepare a statement $of$ cash flows$-$direct method, and compute free cash flow.

$P12\mathrm{.}7(LO2,3),AP$ Presented here are the financial statements $of$ Warner Company.

$P12\mathrm{.}7(LO2,3),AP$ Presented here are the financial statements $of$ Warner Company.

Additional data:

Depreciation expense was $$17,500.$

Dividends declared and paid were $$20,000.$

During the year, equipment was sold for $$8,500$ cash. This equipment originally cost $$18,000$ and had accumulated depreciation $of$ $$9,500at$ the time $of$ sale.

Bonds were redeemed $at$ their carrying value.

Common stock was issued $at$ par for cash.

Instructions

$a.$ Prepare a statement $of$ cash flows using the indirect method.

$a.$ Net cash provided$-$oper. act. $$38,500$

$b.$ Compute free cash flow.

Prepare a statement $of$ cash flows$-$direct method, and compute free cash flow.