Question
Joyner Companys income statement for Year 2 follows: Sales $ 705,000 Cost of goods sold 53,000 Gross margin 652,000 Selling and administrative expenses 217,000 Net
Joyner Companys income statement for Year 2 follows:
Sales | $ | 705,000 |
Cost of goods sold | 53,000 | |
Gross margin | 652,000 | |
Selling and administrative expenses | 217,000 | |
Net operating income | 435,000 | |
Nonoperating items: | ||
Gain on sale of equipment | 8,000 | |
Income before taxes | 443,000 | |
Income taxes | 132,900 | |
Net income | $ | 310,100 |
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
Year 2 | Year 1 | ||||
Assets | |||||
Cash | $ | 264,400 | $ | 47,700 | |
Accounts receivable | 267,000 | 137,000 | |||
Inventory | 320,000 | 285,000 | |||
Prepaid expenses | 11,000 | 22,000 | |||
Total current assets | 862,400 | 491,700 | |||
Property, plant, and equipment | 629,000 | 516,000 | |||
Less accumulated depreciation | 165,000 | 131,900 | |||
Net property, plant, and equipment | 464,000 | 384,100 | |||
Loan to Hymans Company | 46,000 | 0 | |||
Total assets | $ | 1,372,400 | $ | 875,800 | |
Liabilities and Stockholders' Equity | |||||
Accounts payable | $ | 316,000 | $ | 253,000 | |
Accrued liabilities | 45,000 | 51,000 | |||
Income taxes payable | 85,900 | 80,800 | |||
Total current liabilities | 446,900 | 384,800 | |||
Bonds payable | 206,000 | 106,000 | |||
Total liabilities | 652,900 | 490,800 | |||
Common stock | 344,000 | 286,000 | |||
Retained earnings | 375,500 | 99,000 | |||
Total stockholders' equity | 719,500 | 385,000 | |||
Total liabilities and stockholders' equity | $ | 1,372,400 | $ | 875,800 | |
Equipment that had cost $30,900 and on which there was accumulated depreciation of $10,300 was sold during Year 2 for $28,600. 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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