Joyner Companys income statement for Year 2 follows:

Sales $ 712,000 Cost of goods sold 120,000 Gross margin 592,000 Selling and administrative expenses 217,000 Net operating income 375,000 Nonoperating items: Gain on sale of equipment 9,000 Income before taxes 384,000 Income taxes 115,200 Net income $ 268,800

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

Year 2 Year 1 Assets Cash $ 233,100 $ 62,500 Accounts receivable 263,000 139,000 Inventory 318,000 274,000 Prepaid expenses 8,000 16,000 Total current assets 822,100 491,500 Property, plant, and equipment 636,000 519,000 Less accumulated depreciation 166,500 131,800 Net property, plant, and equipment 469,500 387,200 Loan to Hymans Company 43,000 0 Total assets $ 1,334,600 $ 878,700 Liabilities and Stockholders' Equity Accounts payable $ 313,000 $ 268,000 Accrued liabilities 49,000 57,000 Income taxes payable 85,900 80,700 Total current liabilities 447,900 405,700 Bonds payable 210,000 102,000 Total liabilities 657,900 507,700 Common stock 345,000 275,000 Retained earnings 331,700 96,000 Total stockholders' equity 676,700 371,000 Total liabilities and stockholders' equity $ 1,334,600 $ 878,700

Equipment that had cost $31,500 and on which there was accumulated depreciation of $11,000 was sold during Year 2 for $29,500. 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.