Question

Joyner Company’s income statement for Year 2 follows:

Sales	$	707,000
Cost of goods sold		143,000
Gross margin		564,000
Selling and administrative expenses		216,000
Net operating income		348,000
Nonoperating items:
Gain on sale of equipment		6,000
Income before taxes		354,000
Income taxes		141,600
Net income	$	212,400

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

	Year 2			Year 1
Assets
Cash	$	133,900		$	104,700
Accounts receivable		277,000			123,000
Inventory		319,000			275,000
Prepaid expenses		10,000			20,000
Total current assets		739,900			522,700
Property, plant, and equipment		639,000			501,000
Less accumulated depreciation		166,300			130,000
Net property, plant, and equipment		472,700			371,000
Loan to Hymans Company		45,000			0
Total assets	$	1,257,600		$	893,700
Liabilities and Stockholders' Equity
Accounts payable	$	316,000		$	262,000
Accrued liabilities		42,000			59,000
Income taxes payable		85,000			80,700
Total current liabilities		443,000			401,700
Bonds payable		192,000			112,000
Total liabilities		635,000			513,700
Common stock		347,000			286,000
Retained earnings		275,600			94,000
Total stockholders' equity		622,600			380,000
Total liabilities and stockholders' equity	$	1,257,600		$	893,700

Equipment that had cost $31,000 and on which there was accumulated depreciation of $10,000 was sold during Year 2 for $27,000. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock.

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.

Using the indirect method, compute the net cash provided by/used in operating activities for Year 2. (List any deduction in cash outflows as negative amounts.)

	Joyner Company Statement of Cash Flows—Indirect Method (partial)       0 $0

Prepare a statement of cash flows for Year 2. (List any deduction in cash and cash outflows as negative amounts.)

	Joyner Company Statement of Cash Flows For Year 2 Operating activities:    Investing activities: 0 Financing activities: 0 0 Beginning cash and cash equivalents    Ending cash and cash equivalents $0

Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign.)

	Free cash flow

Answer 1