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	$ 720,000
Cost of goods sold	318,000
Gross margin	402,000
Selling and administrative expenses	150,000
Net operating income	252,000
Nonoperating items:
Gain on sale of equipment	8,000
Income before taxes	260,000
Income taxes	104,000
Net income	$ 156,000

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

	Year 2	Year 1
Assets
Cash	$ 145,600	$ 94,300
Accounts receivable	221,000	115,000
Inventory	318,000	281,000
Prepaid expenses	10,500	21,000
Total current assets	695,100	511,300
Property, plant, and equipment	629,000	509,000
Less accumulated depreciation	165,900	131,300
Net property, plant, and equipment	463,100	377,700
Loan to Hymans Company	48,000	0
Total assets	$ 1,206,200	$ 889,000
Liabilities and Stockholders' Equity
Accounts payable	$ 318,000	$ 262,000
Accrued liabilities	42,000	58,000
Income taxes payable	85,900	82,000
Total current liabilities	445,900	402,000
Bonds payable	195,000	106,000
Total liabilities	640,900	508,000
Common stock	349,000	290,000
Retained earnings	216,300	91,000
Total stockholders' equity	565,300	381,000
Total liabilities and stockholders' equity	$ 1,206,200	$ 889,000

Equipment that had cost $31,400 and on which there was accumulated depreciation of $10,200 was sold during Year 2 for $29,200. 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.