Joyner Company’s income statement for Year 2 follows:   Sales $ 702,000 Cost of goods sold 96,000 Gross margin 606,000 Selling and administrative expenses 151,100 Net operating income 454,900 Nonoperating items:   Gain on sale of equipment 6,000 Income before taxes 460,900 Income taxes 138,270 Net income $ 322,630   Its balance sheet amounts at the end of Years 1 and 2 are as follows:     Year 2 Year 1 Assets     Cash $ 298,230 $ 66,500 Accounts receivable 229,000 123,000 Inventory 320,000 288,000 Prepaid expenses 9,000 18,000 Total current assets 856,230 495,500 Property, plant, and equipment 639,000 508,000 Less accumulated depreciation 165,100 130,100 Net property, plant, and equipment 473,900 377,900 Loan to Hymans Company 43,000 0 Total assets $ 1,373,130 $ 873,400 Liabilities and Stockholders' Equity     Accounts payable $ 314,000 $ 257,000 Accrued liabilities 44,000 50,000 Income taxes payable 86,000 81,400 Total current liabilities 444,000 388,400 Bonds payable 200,000 114,000 Total liabilities 644,000 502,400 Common stock 341,000 273,000 Retained earnings 388,130 98,000 Total stockholders' equity 729,130 371,000 Total liabilities and stockholders' equity $ 1,373,130 $ 873,400   Equipment that had cost $30,900 and on which there was accumulated depreciation of $10,600 was sold during Year 2 for $26,300. 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 $ 702,000
Cost of goods sold 96,000
Gross margin 606,000
Selling and administrative expenses 151,100
Net operating income 454,900
Nonoperating items:  
Gain on sale of equipment 6,000
Income before taxes 460,900
Income taxes 138,270
Net income $ 322,630

 

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

 

  Year 2 Year 1
Assets    
Cash $ 298,230 $ 66,500
Accounts receivable 229,000 123,000
Inventory 320,000 288,000
Prepaid expenses 9,000 18,000
Total current assets 856,230 495,500
Property, plant, and equipment 639,000 508,000
Less accumulated depreciation 165,100 130,100
Net property, plant, and equipment 473,900 377,900
Loan to Hymans Company 43,000 0
Total assets $ 1,373,130 $ 873,400
Liabilities and Stockholders' Equity    
Accounts payable $ 314,000 $ 257,000
Accrued liabilities 44,000 50,000
Income taxes payable 86,000 81,400
Total current liabilities 444,000 388,400
Bonds payable 200,000 114,000
Total liabilities 644,000 502,400
Common stock 341,000 273,000
Retained earnings 388,130 98,000
Total stockholders' equity 729,130 371,000
Total liabilities and stockholders' equity $ 1,373,130 $ 873,400

 

Equipment that had cost $30,900 and on which there was accumulated depreciation of $10,600 was sold during Year 2 for $26,300. 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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