oyner Companys income statement for Year 2 follows:

Sales	$	707,000
Cost of goods sold		227,000
Gross margin		480,000
Selling and administrative expenses		150,400
Net operating income		329,600
Nonoperating items:
Gain on sale of equipment		5,000
Income before taxes		334,600
Income taxes		100,380
Net income	$	234,220

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

	Year 2			Year 1
Assets
Cash	$	228,520		$	74,700
Accounts receivable		225,000			126,000
Inventory		319,000			282,000
Prepaid expenses		8,500			17,000
Total current assets		781,020			499,700
Property, plant, and equipment		627,000			512,000
Less accumulated depreciation		166,400			130,300
Net property, plant, and equipment		460,600			381,700
Loan to Hymans Company		45,000			0
Total assets	$	1,286,620		$	881,400
Liabilities and Stockholders' Equity
Accounts payable	$	312,000		$	261,000
Accrued liabilities		47,000			60,000
Income taxes payable		84,600			80,400
Total current liabilities		443,600			401,400
Bonds payable		205,000			115,000
Total liabilities		648,600			516,400
Common stock		347,000			274,000
Retained earnings		291,020			91,000
Total stockholders' equity		638,020			365,000
Total liabilities and stockholders' equity	$	1,286,620		$	881,400

Equipment that had cost $31,900 and on which there was accumulated depreciation of $10,100 was sold during Year 2 for $26,800. 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.

$ 234,220 Joyner Company Statement of Cash FlowsIndirect Method (partial) Net income Adjustments to convert net income to a cash basis: Decrease in prepaid expenses $ 8,500 Increase in accounts payable 51,000 Decrease in accrued liabilities (13,000) Depreciation 46,200 Gain on sale of equipment (5,000) Increase in accounts receivable (99,000) Increase in inventory (37,000) Increase in income taxes payable 4,200 (44,100) $ 190,120 Net cash provided by operating activities Joyner Company Statement of Cash Flows For Year 2 $ 190,120 Operating activities: Net cash provided by operating activities Investing activities: Proceeds from sale of equipment Loan to Hymans Company Additions to property, plant, and equipment $ 26,800 (45,000) (146,900) (165,100) Net cash used in investing activities Financing activities: Issuance of bonds payable Issuance of common stock Cash dividends paid 90,000 73,000 (34,200) Net cash provided by financing activities Net increase in cash 128,800 153,820 74,700 228,520 Beginning cash and cash equivalents Ending cash and cash equivalents Required 1 Required 2 Required 3 Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign.) Free cash flow $ 70,020 X