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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

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.

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$ 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

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