Question

Joyner Company’s income statement for Year 2 follows:

Sales	718,000
Cost of Goods Sold	367,000
Gross Margin	351,000
Selling and administrative expenses	217,000
Net operating income	134,000
Gain on sale of equipment	8,000
Income before taxes	142,000
Income taxes	56,800
Net Income	$85,200

Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1   Assets   Cash $ 18,700    $ 49,200      Accounts receivable 257,000    139,000      Inventory 319,000    273,000      Prepaid expenses 10,000    20,000      Total current assets 604,700    481,200      Property, plant, and equipment 632,000    513,000       Less accumulated depreciation 166,800    130,600      Net property, plant, and equipment 465,200    382,400      Loan to Hymans Company 48,000    0      Total assets $ 1,117,900    $ 863,600      Liabilities and Stockholders' Equity   Accounts payable $ 318,000    $ 259,000      Accrued liabilities 40,000    55,000      Income taxes payable 85,900    80,600      Total current liabilities 443,900    394,600      Bonds payable 199,000    104,000      Total liabilities 642,900    498,600      Common stock 332,000    274,000      Retained earnings 143,000    91,000      Total stockholders' equity 475,000    365,000      Total liabilities and stockholders' equity $ 1,117,900    $ 863,600

Equipment that had cost $30,200 and on which there was accumulated depreciation of $11,600 was sold during Year 2 for $26,600. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock. a.) Using the indirect method, compute the net cash for operating activities for Year 2. (Negative amount should be indicated by a minus sign.) b.) Prepare a statement of cash flows for Year 2. (List any deduction in cash and cash outflows as negative amounts.) c.) Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign.)

Answer 1