Problem: Preparation of a Statement of Cash Flows- Presented below is a condensed version of the comparative balance sheets for Garcia Corporation for the last two years at December 31.
2008 2007
Cash $442,500 $195,000
Accounts receivable 450,000 462,500
Investments 130,000 185,000
Equipment 745,000 600,000
Less: Accumulated depreciation (265,000) (222,500)
Current liabilities 335,000 377,500
Capital stock 400,000 400,000
Retained earnings 767,500 442,500
Additional information:
Investments were sold at a loss (not extraordinary) of $25,000; no equipment was sold; cash dividends paid were $75,000; and net income was $400,000.
Instructions
(a) Prepare a statement of cash flows for 2008 for Garcia Corporation.
(b) Determine Garcia Corporation's free cash flow.