In: Accounting
Joyner Company’s income statement for Year 2 follows:
Sales | $ | 719,000 |
Cost of goods sold | 100,000 | |
Gross margin | 619,000 | |
Selling and administrative expenses | 150,600 | |
Net operating income | 468,400 | |
Nonoperating items: | ||
Gain on sale of equipment | 9,000 | |
Income before taxes | 477,400 | |
Income taxes | 143,220 | |
Net income | $ | 334,180 |
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
Year 2 | Year 1 | ||||
Assets | |||||
Cash and cash equivalents | $ | 303,780 | $ | 92,100 | |
Accounts receivable | 221,000 | 116,000 | |||
Inventory | 319,000 | 281,000 | |||
Prepaid expenses | 10,500 | 21,000 | |||
Total current assets | 854,280 | 510,100 | |||
Property, plant, and equipment | 639,000 | 516,000 | |||
Less accumulated depreciation | 167,000 | 131,400 | |||
Net property, plant, and equipment | 472,000 | 384,600 | |||
Loan to Hymans Company | 50,000 | 0 | |||
Total assets | $ | 1,376,280 | $ | 894,700 | |
Liabilities and Stockholders' Equity | |||||
Accounts payable | $ | 314,000 | $ | 269,000 | |
Accrued liabilities | 46,000 | 58,000 | |||
Income taxes payable | 85,100 | 81,700 | |||
Total current liabilities | 445,100 | 408,700 | |||
Bonds payable | 193,000 | 109,000 | |||
Total liabilities | 638,100 | 517,700 | |||
Common stock | 341,000 | 283,000 | |||
Retained earnings | 397,180 | 94,000 | |||
Total stockholders' equity | 738,180 | 377,000 | |||
Total liabilities and stockholders' equity | $ | 1,376,280 | $ | 894,700 | |
Equipment that had cost $30,700 and on which there was accumulated depreciation of $10,200 was sold during Year 2 for $29,500. 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.
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