Joyner Companys income statement for Year 2 follows:

Joyner Companys Income Statement
Sales	$	900,000
Cost of goods sold		500,000
Gross margin		400,000
Selling and administrative expenses		328,000
Net operating income		72,000
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:

Joyner Company's Balance Sheet
	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.

Sam Conway, president of the company, considers $15,000 to be the minimum cash balance for operating purposes. As can be seen from the balance sheet data, only $4,000 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:

Using the direct method, adjust the companys income statement to a cash basis for Year 2. (Adjustment amounts that are to be deducted should be indicated with a minus sign.)

2.	Using the data from (1) above and other data from the problem as needed, prepare a statement of cash flows for Year 2. (Cash outflows and amounts to be deducted should be indicated with a minus sign.)