Question

ts balance sheet amounts at the end of Years 1 and 2 are as follows: Joyner Company's income statement for Year 2 follows: Year 2 Year 1 $ 713,000 227,000 486,000 218,000 268,000 $ 121,200 262,000 320,800 10,500 713,780 633,000 165,300 467,700 46.000 $1,227,400 $ 85,600 115,000 270,000 21,000 491,600 510,000 130,500 379.509 Sales Cost of goods sold Gross margin Selling and administrative expen Net operating income Nonoperating items: Gain on sale of equipment Income before taxes Income taxes Net income $871.188 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Loan to Hymans Company Total assets Liabilities and Stockholders' Equity Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities Common stock Retained earnings Totol stockholders' equity Total liabilities and stockholders' equity 10,000 278,000 111,200 $ 166,800 $318,000 47,000 85,800 450,00 205,000 655,800 348,000 223,600 571, 600 $1,227,400 $ 253,000 55,000 81,100 389,182 118,000 507,100 274,000 90,000 3 64,000 Its balance sheet amounts at the end of Years 1 and 2 are as folk Assets Cash Accounts receivable Inventory WNE ANON < Prev 3.0 3 Help S Equipment that had cost $31,400 and on which there was accumulated depreciation of $10,000 was sold during Year 2 for $31,400. 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. Complete this question by entering your answers in the tabs below.

Answer 1

Solution 1:

Joyner Company
Statement of Cash Flows (Partial)
For year 2
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income	$166,800.00
Adjustments to reconcile net income to net cash provided by operations:
Depreciation Expense ($165,300 - $130,500 + $10,000)	$44,800.00
Gain on sale of equipment	-$10,000.00
Increase in accounts receivables ($262,000 - $115,000)	-$147,000.00
Increase in inventory ($320,000 - $270,000)	-$50,000.00
Decrease in prepaid expenses ($21,000 - $10,500)	$10,500.00
Increase in accounts payable ($318,000 - $253,000)	$65,000.00
Decrease in accrued liabilities ($55,000 - $47,000)	-$8,000.00
Increase in income tax payable ($85,800 - $81,100)	$4,700.00
Net Cash provided by operating activities		$76,800.00

Solution 2:

Joyner Company
Statement of Cash Flows
For year 2
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Cash provided by operating activities		$76,800.00
Cash Flow from Investing Activities:
Purchase of Property, Plant and Equipment ($633,000 - $510,000 + $31,400)	-$154,400.00
Loan to Hymans Company	-$46,000.00
Sale of equipment	$31,400.00
Net Cash used in Investing activities		-$169,000.00
Cash Flow from Financing Activities:
Proceed from issue of common stock ($348,000 - $274,000)	$74,000.00
Dividend Paid ($90,000 + $166,800 - $223,600)	-$33,200.00
Proceed from issue of bond ($205,000 - $118,000)	$87,000.00
Net Cash Provided by financing activities		$127,800.00
Net Increase / (Decrease) in Cash		$35,600.00
Cash balance at beginning of year		$85,600.00
Cash balance at end of year		$121,200.00

solution 3:

Free cash flow for year 2 = Cash from operating activities - Capital expenditure - Dividend paid

= $76,800 - $154,400 - $33200 = ($110,800)