Question
Joyner Companys income statement for Year 2 follows: Sales $ 720,000 Cost of goods sold 70,000 Gross margin 650,000 Selling and administrative expenses 151,900 Net
Joyner Companys income statement for Year 2 follows:
Sales | $ 720,000 |
---|---|
Cost of goods sold | 70,000 |
Gross margin | 650,000 |
Selling and administrative expenses | 151,900 |
Net operating income | 498,100 |
Nonoperating items: | |
Gain on sale of equipment | 8,000 |
Income before taxes | 506,100 |
Income taxes | 202,440 |
Net income | $ 303,660 |
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
Year 2 | Year 1 | |
---|---|---|
Assets | ||
Cash | $ 293,560 | $ 66,300 |
Accounts receivable | 221,000 | 131,000 |
Inventory | 319,000 | 281,000 |
Prepaid expenses | 8,000 | 16,000 |
Total current assets | 841,560 | 494,300 |
Property, plant, and equipment | 629,000 | 505,000 |
Less accumulated depreciation | 165,600 | 131,100 |
Net property, plant, and equipment | 463,400 | 373,900 |
Loan to Hymans Company | 47,000 | 0 |
Total assets | $ 1,351,960 | $ 868,200 |
Liabilities and Stockholders' Equity | ||
Accounts payable | $ 318,000 | $ 250,000 |
Accrued liabilities | 49,000 | 51,000 |
Income taxes payable | 85,100 | 81,200 |
Total current liabilities | 452,100 | 382,200 |
Bonds payable | 201,000 | 107,000 |
Total liabilities | 653,100 | 489,200 |
Common stock | 338,000 | 288,000 |
Retained earnings | 360,860 | 91,000 |
Total stockholders' equity | 698,860 | 379,000 |
Total liabilities and stockholders' equity | $ 1,351,960 | $ 868,200 |
Equipment that had cost $31,600 and on which there was accumulated depreciation of $10,200 was sold during Year 2 for $29,400. 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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