Purpose: (L.O. 3, 4) This exercise will provide you with an opportunity to prepare a statement of cash flows.
A comparative balance sheet for Hernan Perez Pictures appears below:
(a) Prepare a statement of cash flows for 2014 using the indirect method.
(b) Compute the amount of free cash flow for 2014.
TIP: In this exercise, you must analyze the changes in the Retained Earnings account balance to determine the net income figure for 2014.