Problem 12-10A Prepare a Statement of Cash Flows; Free Cash Flow [LO12-1, LO12-2, LO12-3]

Joyner Companys income statement for Year 2 follows:

Sales	$	705,000
Cost of goods sold		373,000
Gross margin		332,000
Selling and administrative expenses		216,000
Net operating income		116,000
Gain on sale of equipment		7,000
Income before taxes		123,000
Income taxes		49,200
Net income	$	73,800

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

	Year 2		Year 1
Assets
Cash	$	8,200	$	61,600
Accounts receivable		268,000		148,000
Inventory		318,000		274,000
Prepaid expenses		9,500		19,000
Total current assets		603,700		502,600
Property, plant, and equipment		632,000		519,000
Less accumulated depreciation		166,200		131,700
Net property, plant, and equipment		465,800		387,300
Loan to Hymans Company		41,000		0
Total assets	$	1,110,500	$	889,900
Liabilities and Stockholders' Equity
Accounts payable	$	318,000	$	259,000
Accrued liabilities		43,000		60,000
Income taxes payable		84,900		80,900
Total current liabilities		445,900		399,900
Bonds payable		197,000		110,000
Total liabilities		642,900		509,900
Common stock		332,000		288,000
Retained earnings		135,600		92,000
Total stockholders' equity		467,600		380,000
Total liabilities and stockholders' equity	$	1,110,500	$	889,900

Equipment that had cost $30,300 and on which there was accumulated depreciation of $10,300 was sold during Year 2 for $27,000. 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 for operating activities for Year 2. (Negative amount should be indicated by a minus sign.)

2.	Prepare a statement of cash flows for Year 2. (List any deduction in cash and cash outflows as negative amounts.)

3.	Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign.)