Problem 13-10 Prepare a Statement of Cash Flows; Free Cash Flow[LO13-1, LO13-2, LO13-3]
Joyner Company’s income statement for Year 2 follows:
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| Sales | $ | 711,000 |
| Cost of goods sold | | 227,000 |
| Gross margin | | 484,000 |
| Selling and administrative expenses | | 218,000 |
| Net operating income | | 266,000 |
| Nonoperating items: | | |
| Gain on sale of equipment | | 8,000 |
| Income before taxes | | 274,000 |
| Income taxes | | 109,600 |
| Net income | $ | 164,400 |
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Its balance sheet amounts at the end of Years 1 and 2 are asfollows:
| Year 2 | | Year 1 |
| Assets | | | | | |
| Cash and cash equivalents | $ | 113,400 | | $ | 86,700 |
| Accounts receivable | | 273,000 | | | 115,000 |
| Inventory | | 320,000 | | | 271,000 |
| Prepaid expenses | | 8,500 | | | 17,000 |
| Total current assets | | 714,900 | | | 489,700 |
| Property, plant, and equipment | | 635,000 | | | 511,000 |
| Less accumulated depreciation | | 166,000 | | | 130,600 |
| Net property, plant, and equipment | | 469,000 | | | 380,400 |
| Loan to Hymans Company | | 46,000 | | | 0 |
| Total assets | $ | 1,229,900 | | $ | 870,100 |
| Liabilities and Stockholders' Equity | | | | | |
| Accounts payable | $ | 319,000 | | $ | 261,000 |
| Accrued liabilities | | 46,000 | | | 55,000 |
| Income taxes payable | | 84,200 | | | 81,100 |
| Total current liabilities | | 449,200 | | | 397,100 |
| Bonds payable | | 208,000 | | | 102,000 |
| Total liabilities | | 657,200 | | | 499,100 |
| Common stock | | 343,000 | | | 274,000 |
| Retained earnings | | 229,700 | | | 97,000 |
| Total stockholders' equity | | 572,700 | | | 371,000 |
| Total liabilities and stockholders' equity | $ | 1,229,900 | | $ | 870,100 |
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Equipment that had cost $31,200 and on which there wasaccumulated depreciation of $10,200 was sold during Year 2 for$29,000. 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 providedby/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.
| Statement of cash flows--Indirect Method (partial) |
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| Joyner Company |
| Statement of Cash Flows |
| For Year 2 |
| Operatingactivities: | | |
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| InvestingActivities: | | |
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| FinancingActivities | | |
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| Beginningcash and cash equivalents | | |
| Endingcash and cash equivalents | | |
Free cash flow:______
