Joyner Company’s income statement for Year 2 follows: Sales $ 910,000 Cost of goods sold 500,500 Gross margin 409,500 Selling and administrative expenses 324,000 Net operating income 85,500 Nonoperating items: Gain on sale of equipment 9,000 Income before taxes 94,500 Income taxes 28,350 Net income $ 66,150 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 Assets Cash $ -17,800 $ -22,800 Accounts receivable 250,000 175,000 Inventory 307,000 264,000 Prepaid expenses 8,500 17,000 Total current assets 547,700 433,200 Property, plant, and equipment 513,000 404,000 Less accumulated depreciation 128,250 121,200 Net property, plant, and equipment 384,750 282,800 Loan to Hymans Company 35,000 0 Total assets $ 967,450 $ 716,000 Liabilities and Stockholders' Equity Accounts payable $ 314,000 $ 253,000 Accrued liabilities 21,000 26,000 Income taxes payable 49,000 42,000 Total current liabilities 384,000 321,000 Bonds payable 187,000 69,000 Total liabilities 571,000 390,000 Common stock 280,000 245,000 Retained earnings 116,450 81,000 Total stockholders' equity 396,450 326,000 Total liabilities and stockholders' equity $ 967,450 $ 716,000 Equipment that had cost $36,000 and on which there was accumulated depreciation of $30,000 was sold during Year 2 for $15,000. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock. Required: 1. Using the indirect method, compute the net cash provided by/used in operating activities for Year 2. 2. Prepare a statement of cash flows for Year 2. 3. Compute the free cash flow for Year 2.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Joyner Company’s income statement for Year 2 follows:

 

Sales $ 910,000
Cost of goods sold 500,500
Gross margin 409,500
Selling and administrative expenses 324,000
Net operating income 85,500
Nonoperating items:  
Gain on sale of equipment 9,000
Income before taxes 94,500
Income taxes 28,350
Net income $ 66,150

 

Its balance sheet amounts at the end of Years 1 and 2 are as follows:

 

  Year 2 Year 1
Assets    
Cash $ -17,800 $ -22,800
Accounts receivable 250,000 175,000
Inventory 307,000 264,000
Prepaid expenses 8,500 17,000
Total current assets 547,700 433,200
Property, plant, and equipment 513,000 404,000
Less accumulated depreciation 128,250 121,200
Net property, plant, and equipment 384,750 282,800
Loan to Hymans Company 35,000 0
Total assets $ 967,450 $ 716,000
Liabilities and Stockholders' Equity    
Accounts payable $ 314,000 $ 253,000
Accrued liabilities 21,000 26,000
Income taxes payable 49,000 42,000
Total current liabilities 384,000 321,000
Bonds payable 187,000 69,000
Total liabilities 571,000 390,000
Common stock 280,000 245,000
Retained earnings 116,450 81,000
Total stockholders' equity 396,450 326,000
Total liabilities and stockholders' equity $ 967,450 $ 716,000

 

Equipment that had cost $36,000 and on which there was accumulated depreciation of $30,000 was sold during Year 2 for $15,000. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock.

 

Required:

1. Using the indirect method, compute the net cash provided by/used in operating activities for Year 2.

2. Prepare a statement of cash flows for Year 2.

3. Compute the free cash flow for Year 2.

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