E5-15B (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.

E5-15B (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.

                                                                                2014                   2013

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 2012 for Garcia Corporation.

(b) Determine Garcia Corporation’s free cash flow.