Problem 13-10 (Algo) Prepare a Statement of Cash Flows; Free Cash Flow [LO13-1, LO13-2, LO13-3]

Joyner Companys income statement for Year 2 follows:

Sales	$ 915,000
Cost of goods sold	503,250
Gross margin	411,750
Selling and administrative expenses	328,000
Net operating income	83,750
Nonoperating items:
Gain on sale of equipment	6,000
Income before taxes	89,750
Income taxes	26,925
Net income	$ 62,825

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

	Year 2	Year 1
Assets
Cash	$ -34,025	$ -9,500
Accounts receivable	251,000	174,000
Inventory	306,000	262,000
Prepaid expenses	6,500	13,000
Total current assets	529,475	439,500
Property, plant, and equipment	505,000	395,000
Less accumulated depreciation	126,250	118,500
Net property, plant, and equipment	378,750	276,500
Loan to Hymans Company	36,000	0
Total assets	$ 944,225	$ 716,000
Liabilities and Stockholders' Equity
Accounts payable	$ 308,000	$ 249,000
Accrued liabilities	16,000	33,000
Income taxes payable	42,000	38,000
Total current liabilities	366,000	320,000
Bonds payable	184,000	73,000
Total liabilities	550,000	393,000
Common stock	280,000	240,000
Retained earnings	114,225	83,000
Total stockholders' equity	394,225	323,000
Total liabilities and stockholders' equity	$ 944,225	$ 716,000

Equipment that had cost $37,000 and on which there was accumulated depreciation of $28,000 was sold during Year 2 for $15,000. 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 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.