Question
Joyner Companys income statement for Year 2 follows: Sales $ 710,000 Cost of goods sold 387,000 Gross margin 323,000 Selling and administrative expenses 150,400 Net
Joyner Companys income statement for Year 2 follows:
Sales | $ | 710,000 |
Cost of goods sold | 387,000 | |
Gross margin | 323,000 | |
Selling and administrative expenses | 150,400 | |
Net operating income | 172,600 | |
Nonoperating items: | ||
Gain on sale of equipment | 7,000 | |
Income before taxes | 179,600 | |
Income taxes | 53,880 | |
Net income | $ | 125,720 |
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
Year 2 | Year 1 | ||||
Assets | |||||
Cash and cash equivalents | $ | 115,620 | $ | 45,300 | |
Accounts receivable | 229,000 | 139,000 | |||
Inventory | 319,000 | 289,000 | |||
Prepaid expenses | 10,500 | 21,000 | |||
Total current assets | 674,120 | 494,300 | |||
Property, plant, and equipment | 625,000 | 515,000 | |||
Less accumulated depreciation | 166,900 | 131,300 | |||
Net property, plant, and equipment | 458,100 | 383,700 | |||
Loan to Hymans Company | 41,000 | 0 | |||
Total assets | $ | 1,173,220 | $ | 878,000 | |
Liabilities and Stockholders' Equity | |||||
Accounts payable | $ | 311,000 | $ | 263,000 | |
Accrued liabilities | 47,000 | 57,000 | |||
Income taxes payable | 85,700 | 81,000 | |||
Total current liabilities | 443,700 | 401,000 | |||
Bonds payable | 196,000 | 112,000 | |||
Total liabilities | 639,700 | 513,000 | |||
Common stock | 347,000 | 273,000 | |||
Retained earnings | 186,520 | 92,000 | |||
Total stockholders' equity | 533,520 | 365,000 | |||
Total liabilities and stockholders' equity | $ | 1,173,220 | $ | 878,000 | |
Equipment that had cost $32,000 and on which there was accumulated depreciation of $11,600 was sold during Year 2 for $27,400. 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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