Joyner Company's income statement for Year 2 follows (first image):Its balance sheet amounts at the end of Years 1 and 2 are as follows (second image):Equipment that had cost $31,100 and on which there was accumulated depreciation of $10,900 was sold during Year 2 for $29,200. 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 (Statement of Cash Flows — Indirect Method (partial)).2. Prepare a statement of cash flows for Year 2.3. Compute the free cash flow for Year 2. $710,000276,000SalesCost of goods soldGross margin434,000150,400Selling and administrative expensesNet operating incomeNonoperating items:Gain on sale of equipment283, 6009,000292,600117,040Income before taxesIncome taxesNet income$175,560 Year 2Year 1Assets$ 85,000118,000272,00022,000497,000Cash145,560229,000319,00011,000Accounts receivableInventoryPrepaid expensesTotal current assets704,560507,000131,600375,400Property, plant, and equipment637,000165,700Less accumulated depreciationNet property, plant, and equipmentLoan to Hymans Company471,30046,000Total assets$1,221,860$872,400Liabilities and Stockholders' EquityAccounts payable314,00045,00086,000445,000200,000645,000343,000$265,000Accrued liabilities58,00081,400Income taxes payable404,400105,000509,400Total current liabilitiesBonds payableTotal liabilitiesCommon stock273,000Retained earnings233,86090,000Total stockholders' equity576,860363,000Total liabilities and stockholders' equity$1,221,860$872,400

Cash flow Statement: It is prepared by the companies. It is a tool in the hands of users of financial statements to know about the sources and uses of cash of a company over a period of time from different activities. It is especially useful for short term analysis of cash position and planning.Joyner Company Statement of cash flows from operating activities For Year 2 Particular Amount ($) Amount ($) Cash flows from Operating Activities: Net Income 175,560 Adjustment to reconcile Net Income to net cash provided by operating activities Depreciation expenses (Working note -1) 45,000 Gain on sale of equipment (Working note -2) 9,000 Increase in account receivable (111,000) Increase in Inventory (47,000) Decrease in Prepaid expenses 11,000 Increase in accounts payable 49,000 Decrease in accrued liabilities (13,000) Increase in Income tax Payable 4,600 Net cash flow from operating activities 123,160Net cash flow from operating activities = $123,160Joyner Company Statement of cash flow For Year 2 Particular Amount ($) Amount ($) Operating activities Net Cash flows from Operating Activities 123,160 Investing activities Sale of equipment 29,200 Purchase of equipment (161,100) Loan to Hymans company (46,000) Net Cash flow from Investing activities (177,900) Financing activities Issuance of bonds payable 95,000 Issuance of Common stock 70,000 Cash dividend paid (49,700) Net Cash flow from Financing activities 115,300 Net Increase in cash & cash equivalent 60,560 Cash & cash equivalent in the beginning 85,000 Cash & cash equivalent at the end 145,560Particular Amount ($) Amount ($) Net Cash flow from operating activities 123,160 Less: Capital expenditures (161,100) Less: Cash dividend paid (49,700) (210,800) Free Cashflow (87,640)Free cash flow = $87,6401) Depreciation Accumulated depreciation in year 1 = $131,600 Accumulated depreciation in year 2 = $165,700 Depreciation on sale equipment = 10,900 Depreciation in cash flow = $165700 - $131,600 + $10,900Depreciation in cash flow = $45,000 2.) Gain on sale of equipment Cost of equipment = $31,100 Accumulated depreciation on equipment = $10,900 Equipment sold = $29,200 Gain on sale of equipment = $31,100 - $10,900 - $29,200Gain on sale of equipment = $9,000 3) Equipment purchase Equipment in year 1 = $507,000 Equipment in year 2 = $637,000 Equipment sold = $31,100 Equipment purchase = $637,000 - $507,000 + $31,100Equipment purchase = $161,100