In: Accounting
Joyner Company’s income statement for Year 2 follows:
Sales | $ | 702,000 |
Cost of goods sold | 304,000 | |
Gross margin | 398,000 | |
Selling and administrative expenses | 216,000 | |
Net operating income | 182,000 | |
Nonoperating items: | ||
Gain on sale of equipment | 9,000 | |
Income before taxes | 191,000 | |
Income taxes | 57,300 | |
Net income | $ | 133,700 |
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
Year 2 | Year 1 | ||||
Assets | |||||
Cash | $ | 91,900 | $ | 57,600 | |
Accounts receivable | 272,000 | 140,000 | |||
Inventory | 319,000 | 277,000 | |||
Prepaid expenses | 8,500 | 17,000 | |||
Total current assets | 691,400 | 491,600 | |||
Property, plant, and equipment | 624,000 | 519,000 | |||
Less accumulated depreciation | 166,400 | 130,700 | |||
Net property, plant, and equipment | 457,600 | 388,300 | |||
Loan to Hymans Company | 42,000 | 0 | |||
Total assets | $ | 1,191,000 | $ | 879,900 | |
Liabilities and Stockholders' Equity | |||||
Accounts payable | $ | 319,000 | $ | 260,000 | |
Accrued liabilities | 48,000 | 59,000 | |||
Income taxes payable | 86,000 | 81,900 | |||
Total current liabilities | 453,000 | 400,900 | |||
Bonds payable | 192,000 | 108,000 | |||
Total liabilities | 645,000 | 508,900 | |||
Common stock | 350,000 | 276,000 | |||
Retained earnings | 196,000 | 95,000 | |||
Total stockholders' equity | 546,000 | 371,000 | |||
Total liabilities and stockholders' equity | $ | 1,191,000 | $ | 879,900 | |
Equipment that had cost $30,900 and on which there was accumulated depreciation of $11,800 was sold during Year 2 for $28,100. 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.
2. Prepare a statement of cash flows for Year 2.
3. Compute the free cash flow for Year 2.