Required:

1. Using the direct method, adjust the companys income statement to a cash basis for Year 2.

2. Using the data from (1) above and other data from the problem as needed, prepare a statement of cash flows for Year 2.

Joyner Company's income statement for Year 2 follows Joyner Companys Income Statement Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items: $792,000 403,000 389,000 216,000 173,000 Gain on sale of equipment Income before taxes Income taxes Net income 9,000 182,000 72,800 $109,200 Its balance sheet amounts at the end of Years 1 and 2 are as follows Joyner Companys Balance Sheet Year 2 Year 1 AssetS Cash Accounts receivable Inventory Prepaid expenses Total current assets Property, plant, and equipment 151,000 $192,000 279,000 118,000 318,000 270,000 22,000 759,000 602,000 506,000 396,000 166,800 130,800 339,200 265,200 11,000 Less accumulated depreciation Net property, plant, and equipment Loan to Hymans Company Total assets 47,000 $1,145,200 $867,200 Liabilities and Stockholders' Equity Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds pavable Total 1iabilities Common stock Retained earnings Total stockholders' equity 315,000 259,000 42,000 56,000 80,200 441,400 395,200 194,000 110,000 635,400 505,200 339,000 270,000 92,000 509,800 362,000 $1,145,200 $867,200 84,400 170,800 Total liabilities and stockholders equity Equipment that had cost $30,700 and on which there was accumulated depreciation of $11,600 was sold during Year 2 for $28,100 The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock