Question
Joyner Companys income statement for Year 2 follows: Income before taxes Income taxes Sales $ 900,000 Cost of goods sold 500,000 Gross margin 400,000 Selling
Joyner Companys income statement for Year 2 follows:
Income before taxes Income taxes
Sales | $ 900,000 |
---|---|
Cost of goods sold | 500,000 |
Gross margin | 400,000 |
Selling and administrative expenses | 328,000 |
Net operating income | 72,000 |
Nonoperating items: | |
Gain on sale of equipment | 8,000 |
Income before taxes | 80,000 |
Income taxes | 24,000 |
Net income | $ 56,000 |
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
Year 2 | Year 1 | |
---|---|---|
Assets | ||
Cash | $ 4,000 | $ 21,000 |
Accounts receivable | 250,000 | 170,000 |
Inventory | 310,000 | 260,000 |
Prepaid expenses | 7,000 | 14,000 |
Total current assets | 571,000 | 465,000 |
Property, plant, and equipment | 510,000 | 400,000 |
Less accumulated depreciation | 132,000 | 120,000 |
Net property, plant, and equipment | 378,000 | 280,000 |
Loan to Hymans Company | 40,000 | 0 |
Total assets | $ 989,000 | $ 745,000 |
Liabilities and Stockholders' Equity | ||
Accounts payable | $ 310,000 | $ 250,000 |
Accrued liabilities | 20,000 | 30,000 |
Income taxes payable | 45,000 | 42,000 |
Total current liabilities | 375,000 | 322,000 |
Bonds payable | 190,000 | 70,000 |
Total liabilities | 565,000 | 392,000 |
Common stock | 300,000 | 270,000 |
Retained earnings | 124,000 | 83,000 |
Total stockholders' equity | 424,000 | 353,000 |
Total liabilities and stockholders' equity | $ 989,000 | $ 745,000 |
Equipment that had cost $40,000 and on which there was accumulated depreciation of $30,000 was sold during Year 2 for $18,000. 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.
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