Question

Joyner Company’s income statement for Year 2 follows:

Sales	$	715,000
Cost of goods sold		286,000
Gross margin		429,000
Selling and administrative expenses		217,000
Net operating income		212,000
Nonoperating items:
Gain on sale of equipment		8,000
Income before taxes		220,000
Income taxes		88,000
Net income	$	132,000

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

	Year 2			Year 1
Assets
Cash	$	79,400		$	70,000
Accounts receivable		265,000			144,000
Inventory		319,000			277,000
Prepaid expenses		10,500			21,000
Total current assets		673,900			512,000
Property, plant, and equipment		639,000			511,000
Less accumulated depreciation		166,600			132,000
Net property, plant, and equipment		472,400			379,000
Loan to Hymans Company		43,000			0
Total assets	$	1,189,300		$	891,000
Liabilities and Stockholders' Equity
Accounts payable	$	316,000		$	266,000
Accrued liabilities		45,000			50,000
Income taxes payable		85,400			82,000
Total current liabilities		446,400			398,000
Bonds payable		200,000			116,000
Total liabilities		646,400			514,000
Common stock		348,000			284,000
Retained earnings		194,900			93,000
Total stockholders' equity		542,900			377,000
Total liabilities and stockholders' equity	$	1,189,300		$	891,000

Equipment that had cost $31,900 and on which there was accumulated depreciation of $10,000 was sold during Year 2 for $29,900. 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.

Required 1

Using the indirect method, compute the net cash provided by/used in operating activities for Year 2. (List any deduction in cash and cash outflows as negative amounts.)

Weaver Company
Statement of Cash Flows—Indirect Method (partial)

Required 2

Prepare a statement of cash flows for Year 2. (List any deduction in cash and cash outflows as negative amounts.)

Joyner Company
Statement of Cash Flows
For Year 2
Operating activities:
Investing activities:
Financing activities:
Beginning cash and cash equivalents
Ending cash and cash equivalents

Required 3

Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign.)

Free cash flow