Question

Presented below are the financial statements of Nosker Company.

NOSKER COMPANY Comparative Balance Sheets December 31
Assets		2015			2014
Cash		$34,870			$19,900
Accounts receivable		32,110			18,370
Inventory		26,790			20,940
Equipment		59,950			77,630
Accumulated depreciation—equipment		(29,190	)		(23,720	)
Total		$124,530			$113,120
Liabilities and Stockholders’ Equity
Accounts payable		$28,400			$ 16,830
Income taxes payable		7,290			8,090
Bonds payable		26,030			33,870
Common stock		18,800			14,480
Retained earnings		44,010			39,850
Total		$124,530			$113,120

NOSKER COMPANY Income Statement For the Year Ended December 31, 2015
Sales revenue		$242,840
Cost of goods sold		176,870
Gross profit		65,970
Operating expenses		23,120
Income from operations		42,850
Interest expense		3,810
Income before income taxes		39,040
Income tax expense		8,340
Net income		$30,700

Additional data:

1.		Dividends declared and paid were $26,540.
2.		During the year equipment was sold for $8,090 cash. This equipment cost $17,680 originally and had a book value of $8,090 at the time of sale.
3.		All depreciation expense, $15,060, is in the operating expenses.
4.		All sales and purchases are on account.

Compute free cash flow.

Free cash flow

$

Answer 1

Free Cash Flow = Cash from operations - Capital Expenditure

= 36940 - 26540 = 10400

WORKINGS:

Statement of Cash Flows (Indirect Method) Cash flow from Operating Activities: Net Income 30700 15060 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense Changes in current operating assets and liabilities: Increase in Accounts receivables Increase in Inventory Increase in Accounts payable Decrease in Income taxes payable -13740 -5850 11570 -800 6240 Cash provided by Operating activities 36940