Joyner Company’s income statement for Year 2 follows: Equipment that had cost $3
ID: 2589564 • Letter: J
Question
Joyner Company’s income statement for Year 2 follows:
Equipment that had cost $30,400 and on which there was accumulated depreciation of $10,800 was sold during Year 2 for $26,600. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock.
Using the indirect method, compute the net cash for operating activities for Year 2. (Negative amount should be indicated by a minus sign.)
Prepare a statement of cash flows for Year 2. (List any deduction in cash and cash outflows as negative amounts.)
Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign.)
Sales $ 703,000 Cost of goods sold 48,000 Gross margin 655,000 Selling and administrative expenses 218,000 Net operating income 437,000 Gain on sale of equipment 7,000 Income before taxes 444,000 Income taxes 177,600 Net income $ 266,400 81,9100 5 570 211 30 8 22 00Explanation / Answer
b. Cash Flow Statement
Particulars
Amount
Total Amount
Cash Flow from Operating Activities
Net Income
266,400
Add: Items for cash basis
Income Tax Provision (Note 1)
177,600
Depreciation (Note 2)
44,900
Gain on sale of Equipment
(7,000)
Accounts Receivable (Increase) (274,000 – 126,000)
(148,000)
Inventory(Increase) (319,000 – 271,000)
(48,000)
Prepaid Expenses(Decrease)
10,500
Accounts Payable (Increase) (311,000 – 262,000)
49,000
Accrued Liabilities (Decrease) (59,000- 44,000)
(15,000)
Income Tax Paid (Note 1)
(173,600)
Cash Flow from operating activities
156,800
Cash Flow from Investing Activates
Sale of Assets
26,600
Purchase of Equipment (Note 3)
(140,400)
Cash Used by Investing activity
(113,800)
Cash Flow from Financing Activity
Issuance of common stock
59,000
Issuance of Bonds
82,000
Loan given by company
(43,000)
Payment of Dividends (Note 4)
(34,100)
Cash flow from Financing activities
63,900
Net Cash Inflow
106,900
Cash at the Beginning of year
85,600
Cash at end of year
192,500
Note 1: Income Taxes Payable Account
Particulars
Amount
Particulars
Amount
Opening Balance
81,700
Income Tax Paid (Balancing Figure)
173,600
Income Tax Expense
177,600
Closing Balance
85,700
TOTAL
259,300
TOTAL
259,300
Note 2: Accumulated Depreciation
Particulars
Amount
Particulars
Amount
Opening Balance
131,900
Equipment Account (Reversal on sale of asset)
10,800
Depreciation Expense
44,900
Closing Balance
166,000
TOTAL
176,800
TOTAL
176,800
Note 3: Asset Account
Particulars
Amount
Particulars
Amount
Opening Balance
515,000
Accumulated Depreciation
10,800
Purchase of Asset
140,400
Cash
19,600
Closing Balance
625,000
TOTAL
655,400
TOTAL
655,400
Note 4: Retained Earnings Account
Particulars
Amount
Particulars
Amount
Opening Balance
97,000
Dividends Paid
34,100
Net Income
266,400
Closing Balance
329,300
TOTAL
176,800
TOTAL
176,800
1. Cash from operating Activities - 156,800
2. Cash flow statement given above.
Particulars
Amount
Total Amount
Cash Flow from Operating Activities
Net Income
266,400
Add: Items for cash basis
Income Tax Provision (Note 1)
177,600
Depreciation (Note 2)
44,900
Gain on sale of Equipment
(7,000)
Accounts Receivable (Increase) (274,000 – 126,000)
(148,000)
Inventory(Increase) (319,000 – 271,000)
(48,000)
Prepaid Expenses(Decrease)
10,500
Accounts Payable (Increase) (311,000 – 262,000)
49,000
Accrued Liabilities (Decrease) (59,000- 44,000)
(15,000)
Income Tax Paid (Note 1)
(173,600)
Cash Flow from operating activities
156,800
Cash Flow from Investing Activates
Sale of Assets
26,600
Purchase of Equipment (Note 3)
(140,400)
Cash Used by Investing activity
(113,800)
Cash Flow from Financing Activity
Issuance of common stock
59,000
Issuance of Bonds
82,000
Loan given by company
(43,000)
Payment of Dividends (Note 4)
(34,100)
Cash flow from Financing activities
63,900
Net Cash Inflow
106,900
Cash at the Beginning of year
85,600
Cash at end of year
192,500
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