Question

In: Accounting

Joyner Company’s income statement for Year 2 follows:   Sales $ 705,000       Cost of goods sold 80,000    ...

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.)

Solutions

Expert Solution

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

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