Question
Joyner Company's income statement for Year 2 follows: Sales $701,000 Cost of goods sold 170,000 Gross margin 531,000 Selling and administrative expenses 217,000 Net operating
Joyner Company's income statement for Year 2 follows:
Sales $701,000
Cost of goods sold 170,000
Gross margin 531,000
Selling and administrative expenses 217,000
Net operating income 314,000
Nonoperating items:
Gain on sale of equipment 7,000
Income before taxes 321,000
Income taxes 128,400
Net income $192,600
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
Year 2 Year 1
Assets
Cash $159,900 $43,000
Accounts receivable 261,000 130,000
Inventory 320,000 286,000
Prepaid expenses 9,000 18,000
Total current assets 749,900 477,000
Property, plant, and equipment 626,000 520,000
Less accumulated depreciation 166,700 130,900
Net property, plant, and equipment 459,300 389,100
Loan to Hymans Company 41,000 0
Total assets $1,250,200 $866,100
Liabilities and Stockholders' Equity
Accounts payable $315,000 $255,000
Accrued liabilities 44,000 52,000
Income taxes payable 84,200 81,100
Total current liabilities 443,200 388,100
Bonds payable 209,000 109,000
Total liabilities 652,200 497,100
Common stock 341,000 273,000
Retained earnings 257,000 96,000
Total stockholders' equity 598,000 369,000
Total liabilities and stockholders' equity$1,250,200 $866,100
Equipment that had cost $30,100 and on which there was accumulated depreciation of $10,400 was sold during Year 2 for $26,700. 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. A statement of cash flows for Year 2.
3. Compute the free cash flow for Year 2.
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