Comparative financial statement data for Carmono Company follow:

	This Year			Last Year
Assets
Cash and cash equivalents	$	14.00		$	27.00
Accounts receivable		76.00			69.00
Inventory		125.00			113.00
Total current assets		215.00			209.00
Property, plant, and equipment		270.00			220.00
Less accumulated depreciation		56.00			42.00
Net property, plant, and equipment		214.00			178.00
Total assets	$	429.00		$	387.00
Liabilities and Stockholders Equity
Accounts payable	$	75.00		$	59.00
Common stock		170.00			130.00
Retained earnings		184.00			198.00
Total liabilities and stockholders equity	$	429.00		$	387.00

For this year, the company reported net income as follows:

Sales	$	1,500.00
Cost of goods sold		900.00
Gross margin		600.00
Selling and administrative expenses		580.00
Net income	$	20.00

This year Carmono declared and paid a cash dividend. There were no sales of property, plant, and equipment during this year. The company did not repurchase any of its own stock this year.

Required:

1. Using the indirect method, prepare a statement of cash flows for this year.

2. Compute Carmonos free cash flow for this year.

Carmono Company Statement of Cash Flows For This Year Ended December 31 Operating activities: Net income $20.00 Adjustments to convert net income to a cash basis: Depreciation $14.00 (7.00) Increase in accounts receivable (12.00) Increase in inventory (16.00) Increase in accounts payable (21.00) (1.00) Investing activities: Decrease in accounts payable (5,000.00) (5,000.00) Financing activities: Cash dividends 6.00 Increase in accounts payable (13.00) (7.00) (5,008.00) Beginning cash and cash equivalents 27.00 Ending cash and cash equivalents $(4,981.00)

	Free cash flow $(19.00)