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.