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P13-8A Rajesh Direct method

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P13-8A Presented below and on the next page are the financial statements of Rajesh Company.

Rajesh Company
Comparative Balance Sheets
31-Dec
Assets   2,014  2,013
Cash   37,000  20,000
Accounts receivable   33,000  14,000
Inventory   30,000  20,000
Equipment   60,000  78,000
Accumulated depreciationÑequipment   (29,000)  (24,000)
 Total   131,000  108,000
Liabilities and Stockholders' Equity 
Accounts payable   29,000  15,000
Income taxes payable   7,000  8,000
Bonds payable   27,000  33,000
Common stock   18,000  14,000
Retained earnings   50,000  38,000
 Total   131,000  108,000
Rajesh Company
Income Statement
For the Year Ended December 31, 2014
Sales revenue   242,000
Cost of goods sold   175,000
Gross profit   67,000
Operating expenses   24,000
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 is 13,300.
2. Dividends declared and paid were $20,000.
3. During the year, equipment was sold for $9,700 cash. This equipment cost $18,000
originally and had accumulated depreciation of $8,300 at the time of sale.

Further analysis reveals the following.

1. Accounts payable pertain to merchandise suppliers.
2. All operating expenses except for depreciation were paid in cash.
3. All depreciation expense is in the operating expenses.
4. All sales and purchases are on account.

Instructions
(a) Prepare a statement of cash fl ows for Rajesh Company using the direct method.
(b) Compute free cash fl ow.

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