Joyner Companys income statement for Year 2 follows: Joyner Company Income Statement Sales $ 782,000 Cost of goods sold 407,000 Gross margin 375,000 Selling and administrative expenses 217,000 Net operating income 158,000 Nonoperating items: Gain on sale of equipment 8,000 Income before taxes 166,000 Income taxes 49,800 Net income $ 116,200 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Joyner Company Balance Sheet Year 2 Year 1 Assets Cash and cash equivalents $ 217,500 $ 194,800 Accounts receivable 274,000 135,000 Inventory 320,000 282,000 Prepaid expenses 9,500 19,000 Total current assets 821,000 630,800 Property, plant, and equipment 453,000 394,000 Less accumulated depreciation 166,200 130,900 Net property, plant, and equipment 286,800 263,100 Loan to Hymans Company 43,000 0 Total assets $ 1,150,800 $ 893,900 Liabilities and Stockholders' Equity Accounts payable 312,000 266,000 Accrued liabilities 46,000 58,000 Income taxes payable 84,400 80,900 Total current liabilities 442,400 404,900 Bonds payable 198,000 118,000 Total liabilities 640,400 522,900 Common stock 333,000 275,000 Retained earnings 177,400 96,000 Total stockholders' equity 510,400 371,000 Total liabilities and stockholders' equity $ 1,150,800 $ 893,900 Equipment that had cost $31,400 and on which there was accumulated depreciation of $11,200 was sold during Year 2 for $28,200. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock. Sam Conway, president of the company, considers $221,500 to be the minimum cash balance for operating purposes. As can be seen from the balance sheet data, only $217,500 in cash was available at the end of the current year. The sharp decline is puzzling to Mr. Conway, particularly because sales and profits are at a record high. Required: 1. Using the direct method, adjust the companys income statement to a cash basis for Year 2. 2. Using the data from (1) above and other data from the problem as needed, prepare a statement of cash flows for Year 2.