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	$	701,000
Cost of goods sold		63,000
Gross margin		638,000
Selling and administrative expenses		217,000
Net operating income		421,000
Gain on sale of equipment		5,000
Income before taxes		426,000
Income taxes		127,800
Net income	$	298,200

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

	Year 2		Year 1
Assets
Cash	$	248,300	$	87,600
Accounts receivable		273,000		137,000
Inventory		319,000		286,000
Prepaid expenses		8,500		17,000
Total current assets		848,800		527,600
Property, plant, and equipment		620,000		503,000
Less accumulated depreciation		165,600		131,600
Net property, plant, and equipment		454,400		371,400
Loan to Hymans Company		48,000		0
Total assets	$	1,351,200	$	899,000
Liabilities and Stockholders' Equity
Accounts payable	$	312,000	$	266,000
Accrued liabilities		45,000		57,000
Income taxes payable		85,800		80,000
Total current liabilities		442,800		403,000
Bonds payable		203,000		119,000
Total liabilities		645,800		522,000
Common stock		345,000		281,000
Retained earnings		360,400		96,000
Total stockholders' equity		705,400		377,000
Total liabilities and stockholders' equity	$	1,351,200	$	899,000

Equipment that had cost $30,400 and on which there was accumulated depreciation of $10,100 was sold during Year 2 for $25,300. 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.)