P$13-7$B Prepare a statement of cash flows $-$ indirect method, and compute free cash flow.

Presented below are the financial statements of Johnston Company.

JOHNSTON COMPANY

Comparative Balance Sheet

December $31$

$20152014$

Assets $$24,000$ $$33,000$

Cash $$25,000$ $$14,000$

Accounts Receivable $41,00025,00016,000$

Inventory

Equipment $$70,00078,000$

Accumulated depreciation$--$equipment $($$$27,000)43,000(24,000)54,000$

Total $133,000126,000$

Liabilities and Stockholders' Equity

Accounts payable $$31,000$ $$43,000$ $$12,000$

Income taxes payable $24,00020,000$

Bonds payable $20,00010,000$

Common stock $25,00025,000$

Retained earnings $33,00028,000$

Total $$133,000$ $$126,000$

JOHNSTON COMPANY

Income Statement

For the Year ended December $31,2015$

Sales revenue $$286,000$

Cost of goods sold $204,000$

Gross profit $82,000$

Operating expenses $37,000$

Income from operations $45,000$

Interest expense $7,000$

Income before income taxes $38,000$

Income tax expense $10,000$

Net income $$28,000$

Additional data:

$1.$ Dividends of $$23,000$ were declared and paid.

$2.$ During the year equipment was sold for $$10,000$ cash. This equipment cost $$15,000$

originally and had a book value of $$10,000$ at the time of sale.

$3.$ All depreciation expense, $$8,000,$ is in the operating expenses.

$4.$ All sales and purchases are on account.

$5.$ Additional equipment was purchased for $$7,000$ cash.

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 $"?".$