Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Joyner Companys income statement for Year 2 follows: Sales $ 708,000 Cost of goods sold 352,000 Gross margin 356,000 Selling and administrative expenses 216,000 Net

Joyner Companys income statement for Year 2 follows:

Sales $ 708,000
Cost of goods sold 352,000

Gross margin 356,000
Selling and administrative expenses 216,000

Net operating income 140,000
Gain on sale of equipment 6,000

Income before taxes 146,000
Income taxes 58,400

Net income $ 87,600

Its balance sheet amounts at the end of Years 1 and 2 are as follows:

Year 2 Year 1
Assets
Cash $ 39,000 $ 91,800
Accounts receivable 259,000 138,000
Inventory 319,000 278,000
Prepaid expenses 9,000 18,000

Total current assets 626,000 525,800

Property, plant, and equipment 621,000 506,000
Less accumulated depreciation 166,700 131,700

Net property, plant, and equipment 454,300 374,300

Loan to Hymans Company 41,000 0

Total assets $ 1,121,300 $ 900,100

Liabilities and Stockholders' Equity
Accounts payable $ 317,000 $ 270,000
Accrued liabilities 46,000 57,000
Income taxes payable 85,500 80,100

Total current liabilities 448,500 407,100
Bonds payable 192,000 108,000

Total liabilities 640,500 515,100

Common stock 330,000 288,000
Retained earnings 150,800 97,000

Total stockholders' equity 480,800 385,000

Total liabilities and stockholders' equity $ 1,121,300 $ 900,100

Equipment that had cost $31,000 and on which there was accumulated depreciation of $11,200 was sold during Year 2 for $25,800. 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 for operating activities for Year 2. (Negative amount should be indicated by a minus sign.)

Net cash provided by operating activities
2.

Prepare a statement of cash flows for Year 2. (List any deduction in cash and cash outflows as negative amounts.)

Joyner Company
Statement of Cash Flows - Indirect Method
For Year 2
Operating activities:
Net income
Adjustments to convert net income to cash basis:
Depreciation
Gain on sale of equipment
Increase in accounts receivable
Increase in inventory
Decrease in prepaid expenses
Increase in accounts payable
Decrease in accrued liabilities
Increase in income taxes payable
0
0
Investing activities:
Proceeds from sale of equipment
Loan to Hymans Company
0
Financing activities:
Issuance of bonds payable
Issuance of common stock
0
0
Beginning cash and cash equivalents
Ending cash and cash equivalents $0
3.

Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign.)

Free cash flow

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Financial Accounting

Authors: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso

7th Edition

1118725786, 978-1118725788

More Books

Students also viewed these Accounting questions