Reference no: EM13533123

Preparing the statement of cash flows-indirect method, evaluating cash flows, and measuring free cash flows

The comparative balance sheet of Jackson Educational Supply at December 31,

2012, reported the following:

December 31,
	2012	2011
Current assets:
Cash and cash equivalents	$ 88,200	$ 22,500
Accounts receivable	14,400	21,700
Inventories	63,600	60,400
Current liabilities:
Accounts payable .	28,600	27,100
Accrued liabilities .	10,600	11,200
Jackson's transactions during 2012 included the following:		Depreciation expense	$ 16,700
Payment of cash dividend	$ 17,200	Purchase of building	100,000
Purchase of equipment	54,400	Net income	59,600
Issuance of long-term note payable to borrow cash	50,000	Issuance of common stock for cash	106,000

Requirements

1. Prepare the statement of cash flows of Jackson Educational Supply for the year ended December 31, 2012. Use the indirect method to report cash flows from operating activities.

2. Evaluate Jackson's cash flows for the year. Mention all three categories of cash flows and give the reason for your evaluation.

3. If Jackson plans similar activity for 2013, what is its expected free cash flow?