Question
Joyner Companys income statement for Year 2 follows: Sales $ 702,000 Cost of goods sold 119,000 Gross margin 583,000 Selling and administrative expenses 150,600 Net
Joyner Companys income statement for Year 2 follows:
Sales | $ | 702,000 |
Cost of goods sold | 119,000 | |
Gross margin | 583,000 | |
Selling and administrative expenses | 150,600 | |
Net operating income | 432,400 | |
Nonoperating items: | ||
Gain on sale of equipment | 6,000 | |
Income before taxes | 438,400 | |
Income taxes | 175,360 | |
Net income | $ | 263,040 |
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
Year 2 | Year 1 | ||||
Assets | |||||
Cash and cash equivalents | $ | 250,040 | $ | 71,000 | |
Accounts receivable | 225,000 | 119,000 | |||
Inventory | 319,000 | 284,000 | |||
Prepaid expenses | 10,000 | 20,000 | |||
Total current assets | 804,040 | 494,000 | |||
Property, plant, and equipment | 623,000 | 516,000 | |||
Less accumulated depreciation | 166,800 | 131,600 | |||
Net property, plant, and equipment | 456,200 | 384,400 | |||
Loan to Hymans Company | 41,000 | 0 | |||
Total assets | $ | 1,301,240 | $ | 878,400 | |
Liabilities and Stockholders' Equity | |||||
Accounts payable | $ | 312,000 | $ | 269,000 | |
Accrued liabilities | 45,000 | 51,000 | |||
Income taxes payable | 84,100 | 80,400 | |||
Total current liabilities | 441,100 | 400,400 | |||
Bonds payable | 203,000 | 105,000 | |||
Total liabilities | 644,100 | 505,400 | |||
Common stock | 333,000 | 278,000 | |||
Retained earnings | 324,140 | 95,000 | |||
Total stockholders' equity | 657,140 | 373,000 | |||
Total liabilities and stockholders' equity | $ | 1,301,240 | $ | 878,400 | |
Equipment that had cost $30,600 and on which there was accumulated depreciation of $11,500 was sold during Year 2 for $25,100. 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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