Question

Problem 13-10 Prepare a Statement of Cash Flows; Free Cash Flow [LO13-1, LO13-2, LO13-3]

Joyner Company’s income statement for Year 2 follows:

Sales	$	711,000
Cost of goods sold		227,000
Gross margin		484,000
Selling and administrative expenses		218,000
Net operating income		266,000
Nonoperating items:
Gain on sale of equipment		8,000
Income before taxes		274,000
Income taxes		109,600
Net income	$	164,400

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

	Year 2			Year 1
Assets
Cash and cash equivalents	$	113,400		$	86,700
Accounts receivable		273,000			115,000
Inventory		320,000			271,000
Prepaid expenses		8,500			17,000
Total current assets		714,900			489,700
Property, plant, and equipment		635,000			511,000
Less accumulated depreciation		166,000			130,600
Net property, plant, and equipment		469,000			380,400
Loan to Hymans Company		46,000			0
Total assets	$	1,229,900		$	870,100
Liabilities and Stockholders' Equity
Accounts payable	$	319,000		$	261,000
Accrued liabilities		46,000			55,000
Income taxes payable		84,200			81,100
Total current liabilities		449,200			397,100
Bonds payable		208,000			102,000
Total liabilities		657,200			499,100
Common stock		343,000			274,000
Retained earnings		229,700			97,000
Total stockholders' equity		572,700			371,000
Total liabilities and stockholders' equity	$	1,229,900		$	870,100

Equipment that had cost $31,200 and on which there was accumulated depreciation of $10,200 was sold during Year 2 for $29,000. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock.

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.

Statement of cash flows--Indirect Method (partial)

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

Free cash flow:______

Answer 1