$ 719,000 293,000 426,000 218,000 208,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items : Gain on sale of equipment Income before taxes Income taxes Net income 7,000 215,000 64,500 $ 150,500 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 $ Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Loan to Hymans Company Total assets Liabilities and Stockholders' Equity Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities 103,600 251,000 320,000 8,000 682,600 635,000 166,000 469,000 46,000 $ 77,400 116,000 287,000 16,000 496,400 509,000 131,300 377,700 $1,197,600 $874,100 $ 317,000 40,000 84,000 441,000 204,000 645,000 $264,000 50,000 80, 100 394,100 102,000 496,100 103,600 251,000 320,000 8,000 682,600 635,000 166,000 469,000 46,000 $1,197,600 $ 77,400 116,000 287,000 16,000 496,400 509,000 131,300 377,700 $874,100 Cash Accounts receivable Inventory Prepaid expenses Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Loan to Hymans Company Total assets Liabilities and Stockholders' Equity Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 317,000 40,000 84,000 441,000 204,000 645,000 339,000 213,600 552, 600 $1,197,600 $264,000 50,000 80,100 394,100 2,000 ,100 284,000 94,000 378,000 $ 874,100 Equipment that had cost $31,100 and on which there was accumulated depreciation of $11,500 was sold during Year 2 for $26,600. 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