In: Accounting
Joyner Company’s income statement for Year 2 follows: |
Sales | $ | 705,000 |
Cost of goods sold | 80,000 | |
Gross margin | 625,000 | |
Selling and administrative expenses | 216,000 | |
Net operating income | 409,000 | |
Gain on sale of equipment | 9,000 | |
Income before taxes | 418,000 | |
Income taxes | 167,200 | |
Net income | $ | 250,800 |
Its balance sheet amounts at the end of Years 1 and 2 are as follows: |
Year 2 | Year 1 | |||
Assets | ||||
Cash | $ | 192,900 | $ | 94,600 |
Accounts receivable | 262,000 | 110,000 | ||
Inventory | 319,000 | 289,000 | ||
Prepaid expenses | 8,500 | 17,000 | ||
Total current assets | 782,400 | 510,600 | ||
Property, plant, and equipment | 637,000 | 505,000 | ||
Less accumulated depreciation | 165,900 | 131,700 | ||
Net property, plant, and equipment | 471,100 | 373,300 | ||
Loan to Hymans Company | 47,000 | 0 | ||
Total
assets |
$ | 1,300,500 | $ | 883,900 |
Liabilities and Stockholders' Equity | ||||
Accounts payable | $ | 318,000 | $ | 253,000 |
Accrued liabilities | 40,000 | 57,000 | ||
Income taxes payable | 84,300 | 81,900 | ||
Total current liabilities | 442,300 | 391,900 | ||
Bonds payable | 202,000 | 119,000 | ||
Total liabilities | 644,300 | 510,900 | ||
Common stock | 338,000 | 274,000 | ||
Retained earnings | 318,200 | 99,000 | ||
Total stockholders' equity | 656,200 | 373,000 | ||
Total liabilities and stockholders' equity | $ | 1,300,500 | $ | 883,900 |
Equipment that had cost $31,100 and on which there was accumulated depreciation of $10,200 was sold during Year 2 for $29,900. 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 for operating activities for Year 2. (Negative amount should be indicated by a minus sign.) |
2. |
Prepare a statement of cash flows for Year 2. (List any deduction in cash and cash outflows as negative amounts.) |
3. |
Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign.) |
Cash flow indirect method | ||
Cash flow from operating activities | ||
Net income | 250800 | |
Adjustments to reconcile the net income | ||
Gain on sale of equipment | -9000 | |
Depreciation expense | 44400 | |
Loss on sale of equipment | ||
Changes in current asset and liabilities | ||
decrease in prepaid expense | 8500 | |
Increase in accounts receivable | -152000 | |
Increase in Inventory | -30000 | |
Increase in accounts payable | 65000 | |
decrease in Acrued liabilities | -17000 | |
Increase in income tax payable | 2400 | |
-87700 | ||
Cash flow from operating activities | 163100 | |
Cash flow from Investing activities | ||
Loan to hymans company | -47000 | |
Equipment purchased | -163100 | |
Equipment sold | 29900 | |
Cash flow from Investing activities | -180200 | |
Cash flow from Financing activities | |||
Bonds payable | 83000 | ||
Common stock | 64000 | ||
Dividend paid | -31600 | ||
Cash flow from Financing activities | 115400 | ||
Net Cash and cash equivalent | 98300 | ||
Add | Beginning cash and cash equivalent | 94600 | |
Ending cash and cash equivalent | 192900 | ||