Chapter 14

Question

Requirement 1

Requirement 2

Requirement 3

Joyner Company's income statement for Year 2 follows: $ 719,000 208,000 511,000 217,000 294,000 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 5,000 299,000 119,600 $ 179,400 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 $ 127,400 269,000 319,000 8,000 723,400 634,000 166, 200 467,800 41,000 $1,232,200 $ 42,800 147,000 282,000 16,000 487,800 517,000 131,200 385,800 $ 873,600 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 Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 311,000 46,000 84,600 441,600 210,000 651,600 343,000 237,600 580,600 $1,232,200 $252,000 54,000 81,600 387,600 113,000 500,600 282,000 91,000 373,000 $ 873,600 Equipment that had cost $31,800 and on which there was accumulated depreciation of $11,700 was sold during Year 2 for $25,100. 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. Required 1 Required 2 Required 3 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 FlowsIndirect Method (partial) Required 1 Required 2 Required 3 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: Financing activities: Beginning cash and cash equivalents Ending cash and cash equivalents Required 1 Required 2 Required 3 Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign.) Free cash flow