Joyner Company’s income statement for Year 2 follows: Its balance sheet amounts
ID: 2578317 • Letter: J
Question
Joyner Company’s income statement for Year 2 follows:
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
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.)
Required 2
Prepare a statement of cash flows for Year 2. (List any deduction in cash and cash outflows as negative amounts.)
Required 3
Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign.)
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 $ 132,000Explanation / Answer
Requirement 1:
Computation of net cash provided by/ used in operating activities in year 2:
Particulars
Amount ($)
Cash from operating Activities
Net Income
132000
Add: Depreciation (166600-(132000-10000))
Gain on sale of equipment
Gain on sale of investments
Interest Paid
Income Tax Expense
44600
-8000
88000
Cash Operating activities before working capital adjustments, and taxes
256600
Working Capital Adjustments
Add:
Increase in Accounts Payable (316000-266000)
Decrease in prepaid expenses (21000-10500)
Increase in Accrued Liabilities
50000
10500
Less: Increase in Inventory (319000-277000)
Increase in Accounts Receivable (265000-144000)
Decrease in Accrued Liabilities (50000-45000)
-42000
-121000
-5000
Cash from operating activities before taxes and extraordinary items
149100
Less: Extraordinary loss
Cash From operating activities before taxes
Less: Taxes (82000+88000-85400)
-84600
Cash from operating activities
64500
Requirement 2:
Statement of cash flows:
Particulars
Amount ($)
Cash from operating Activities
Net Income
132000
Add: Depreciation (166600-(132000-10000))
Gain on sale of equipment
Gain on sale of investments
Interest Paid
Income Tax Expense
44600
-8000
88000
Cash Operating activities before working capital adjustments, and taxes
256600
Working Capital Adjustments
Add:
Increase in Accounts Payable (316000-266000)
Decrease in prepaid expenses (21000-10500)
Increase in Accrued Liabilities
50000
10500
Less: Increase in Inventory (319000-277000)
Increase in Accounts Receivable (265000-144000)
Decrease in Accrued Liabilities (50000-45000)
-42000
-121000
-5000
Cash from operating activities before taxes and extraordinary items
149100
Less: Extraordinary loss
Cash From operating activities before taxes
Less: Taxes (82000+88000-85400)
-84600
Cash from operating activities
64500
Cash from investing activities
Add: Sale of equipment
Add: Sales of Investment
Less: Purchase of Equipment (639000-(511000-31900)
Less: Loan advanced
29900
-159900
-43000
Cash from Investing Activities
-173000
Cash from financing Activities
Add: Issue of bonds (200000-116000)
Add: Issue of common stock (348000-284000)
84000
64000
Less: Repurchase of own stock
Less: Redemption of bonds payable
Less: Cash Dividend paid (194900-(132000+93000))
Less: Interest Paid
-30100
Cash from financing activities
53900
Net Increase / decrease in cash
9400
Opening Cash Balance
70000
Closing Cash Balance
79400
Requirement 3:
Free Cash Flow for year 2:
Free Cash Flow
= Operating Cash Flow - Capital Expenditure
= $64500 - $159900
= -$95400
Particulars
Amount ($)
Cash from operating Activities
Net Income
132000
Add: Depreciation (166600-(132000-10000))
Gain on sale of equipment
Gain on sale of investments
Interest Paid
Income Tax Expense
44600
-8000
88000
Cash Operating activities before working capital adjustments, and taxes
256600
Working Capital Adjustments
Add:
Increase in Accounts Payable (316000-266000)
Decrease in prepaid expenses (21000-10500)
Increase in Accrued Liabilities
50000
10500
Less: Increase in Inventory (319000-277000)
Increase in Accounts Receivable (265000-144000)
Decrease in Accrued Liabilities (50000-45000)
-42000
-121000
-5000
Cash from operating activities before taxes and extraordinary items
149100
Less: Extraordinary loss
Cash From operating activities before taxes
Less: Taxes (82000+88000-85400)
-84600
Cash from operating activities
64500
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