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30 Apr 2018

Joyner Company's income statement for year 2 follows:
Sales 900,000
GOGS 500,000
Gross margin 400,000
Selling and administrative expense 328,000
Net operating income 72,000
Gain on sales of equipment 8,000
Income before taxes 80,000
Income taxes 24,000
Net income 56,000
It's balance sheet amounts at the end of years one and 2 areas follows:
Cash y2 4,000 y1 21,000
Acc rec y2 250,000 y1 170,000
Inventory y2 310,000 y1 260,000
Prepaid expense y2 7,000 y1 14,000
Total current assets y2 571,000 y1 465,000
Property, plant, and equipment y2 510,000 y1 400,000
Less accum. Dep. y2 132,000 y1 120,000
Net property, plant, and equipment y2 378,000 y1 280,000
Loan to Hymans company y2 40,000 y1 0
Total assets y2 989,000 y1 745,000
Accounts pay. Y2 310,000 y1 250,000
Accrued liabilities y2 20,000 y1 30,000
Income tax pay. Y2 45,000 y1 42,000
Total current liabilities y2 3750,000 y1 322,000
Bonds pay. Y2 190,000 y1 70,000
Total liabilities y2 565,000 y1 392,000
Common stock y2 300,000 y1 270,000
Retained earnings y2 124,000 y1 83,000
Total stockholders equity y2 424,000 y1 353,000
Total liabilities and stockholders equity y2 989,000 y1745,000
Equipment that had cost $40,000 and on which there wasaccumulated depreciation of $30,000 was sold during year 2 for$18,000. The company declared and paid a cash dividend during year2. It did not retire any bonds or repurchase any of its ownstock.
Required:
1. Using the indirect method, compute the net cash provided byoperating activities for year 2.
2. Prepare a statement of cash flow for year 2.
3. Compute the free cash flow for year 2
4. Briefly explain why cash declined so sharply during theyear.

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Trinidad Tremblay
Trinidad TremblayLv2
1 May 2018

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