Question
Joyner Companys income statement for Year 2 follows: Sales $ 718,000 Cost of goods sold 43,000 Gross margin 675,000 Selling and administrative expenses 218,000 Net
Joyner Companys income statement for Year 2 follows:
Sales | $ | 718,000 |
Cost of goods sold | 43,000 | |
Gross margin | 675,000 | |
Selling and administrative expenses | 218,000 | |
Net operating income | 457,000 | |
Nonoperating items: | ||
Gain on sale of equipment | 8,000 | |
Income before taxes | 465,000 | |
Income taxes | 139,500 | |
Net income | $ | 325,500 |
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
Year 2 | Year 1 | ||||
Assets | |||||
Cash and cash equivalents | $ | 285,100 | $ | 78,400 | |
Accounts receivable | 255,000 | 124,000 | |||
Inventory | 320,000 | 278,000 | |||
Prepaid expenses | 10,000 | 20,000 | |||
Total current assets | 870,100 | 500,400 | |||
Property, plant, and equipment | 634,000 | 509,000 | |||
Less accumulated depreciation | 165,600 | 130,400 | |||
Net property, plant, and equipment | 468,400 | 378,600 | |||
Loan to Hymans Company | 41,000 | 0 | |||
Total assets | $ | 1,379,500 | $ | 879,000 | |
Liabilities and Stockholders' Equity | |||||
Accounts payable | $ | 316,000 | $ | 257,000 | |
Accrued liabilities | 50,000 | 56,000 | |||
Income taxes payable | 85,900 | 81,000 | |||
Total current liabilities | 451,900 | 394,000 | |||
Bonds payable | 195,000 | 119,000 | |||
Total liabilities | 646,900 | 513,000 | |||
Common stock | 349,000 | 275,000 | |||
Retained earnings | 383,600 | 91,000 | |||
Total stockholders' equity | 732,600 | 366,000 | |||
Total liabilities and stockholders' equity | $ | 1,379,500 | $ | 879,000 | |
Equipment that had cost $30,900 and on which there was accumulated depreciation of $11,000 was sold during Year 2 for $27,900. 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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