Equipment that had cost $31,700 and on which there was accumulated depreciation
ID: 2591780 • Letter: E
Question
Equipment that had cost $31,700 and on which there was accumulated depreciation of $10,600 was sold during Year 2 for $27,100. 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.)
Joyner Company’s income statement for Year 2 follows:Explanation / Answer
1. & 2.
Workings:
3. Free cash flow: $24100
Free cash flow = Net cash flow from operating activities - Capital expenditure (net) = $131700 - $107600 = $24100
Capital expenditure (net) = $134700 - $27100 = $107600
JOYNER COMPANY Statement of Cash Flows For Year 2 Cash Flows from Operating Activities Net income 214200 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 43900 Gain on sale of equipment -6000 Increase in Accounts Receivable -153000 Increase in Inventory -36000 Decrease in Prepaid expenses 10000 Increase in Accounts payable 59000 Decrease in Accrued liabilities -6000 Increase in Income taxes payable 5600 -82500 Net cash provided by operating activities 131700 Cash Flows from Investing Activities Sale proceeds of equipment 27100 Purchase of equipment -134700 Loan to Hymans -46000 Net cash used by investing activities -153600 Cash Flows from Financing Activities Issue of bonds payable 83000 Issuance of Common stock 46000 Payment of cash dividends -33000 Net cash provided by financing activities 96000 Net increase (decrease) in cash 74100 Cash balance at beginning of year 2 76900 Cash balance at end of year 2 151000Related Questions
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