Joyner Company’s income statement for Year 2 follows:
Sales | $ | 718,000 |
Cost of goods sold | 43,000 | |
Gross margin | 675,000 | |
Selling and administrative expenses | 218,000 | |
Net operating income | 457,000 | |
Nonoperating items: | ||
Gain on sale of equipment | 8,000 | |
Income before taxes | 465,000 | |
Income taxes | 139,500 | |
Net income | $ | 325,500 |
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
Year 2 | Year 1 | ||||
Assets | |||||
Cash and cash equivalents | $ | 285,100 | $ | 78,400 | |
Accounts receivable | 255,000 | 124,000 | |||
Inventory | 320,000 | 278,000 | |||
Prepaid expenses | 10,000 | 20,000 | |||
Total current assets | 870,100 | 500,400 | |||
Property, plant, and equipment | 634,000 | 509,000 | |||
Less accumulated depreciation | 165,600 | 130,400 | |||
Net property, plant, and equipment | 468,400 | 378,600 | |||
Loan to Hymans Company | 41,000 | 0 | |||
Total assets | $ | 1,379,500 | $ | 879,000 | |
Liabilities and Stockholders' Equity | |||||
Accounts payable | $ | 316,000 | $ | 257,000 | |
Accrued liabilities | 50,000 | 56,000 | |||
Income taxes payable | 85,900 | 81,000 | |||
Total current liabilities | 451,900 | 394,000 | |||
Bonds payable | 195,000 | 119,000 | |||
Total liabilities | 646,900 | 513,000 | |||
Common stock | 349,000 | 275,000 | |||
Retained earnings | 383,600 | 91,000 | |||
Total stockholders' equity | 732,600 | 366,000 | |||
Total liabilities and stockholders' equity | $ | 1,379,500 | $ | 879,000 | |
Equipment that had cost $30,900 and on which there was accumulated depreciation of $11,000 was sold during Year 2 for $27,900. 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.
1.
Joyner Company | |||
Statement of Cash flows | |||
For Year 2 | |||
Cash flows from operating activities | |||
Net Income | $ 325,500 | ||
Adjustments to reconcile net income to ; | |||
Depreciation expense | $ 46,200 | 165600-130400+11000 | |
Gain on sale of equipment | $ (8,000) | ||
Increase in accounts receivable | $ (131,000) | ||
Increase in inventories | $ (42,000) | ||
Decrease in prepaid expense | $ 10,000 | ||
Increase in accounts payable | $ 59,000 | ||
Decrease in accrued liabilities | $ (6,000) | ||
Increase in income tax payable | $ 4,900 | ||
$ (66,900) | |||
Net cash provided by operating activities | $ 258,600 |
2.
Joyner Company | |||
Statement of Cash flows | |||
For Year 2 | |||
Net cash provided by operating activities | $ 258,600 | ||
Cash flows from investing activities | |||
Cash paid for purchase of property, plant and equipment | $ (155,900) | 509000-634000-30900 | |
Cash received from sale of equipment | $ 27,900 | ||
Loan given to Hymans Company | $ (41,000) | ||
Net cash used by investing activities | $ (169,000) | ||
Cash flows from financing activities | |||
Cash paid for dividends | $ (32,900) | 383600-91000-325500 | |
Cash received from issuance of stock | $ 74,000 | ||
Cash received from issuance of bonds | $ 76,000 | ||
Net cash provided by financing activities | $ 117,100 | ||
Net Increase in cash and cash equivalents | $ 206,700 | ||
Cash and cash equivalents at beginning of period | $ 78,400 | ||
Cash and cash equivalents at end of period | $ 285,100 |
3.
Net cash provided by operating activities | $ 258,600 |
Less: Capital expenditures | $ (155,900) |
Less: Dividends | $ (32,900) |
Free cash flow | $ 69,800 |
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Joyner Company’s income statement for Year 2 follows: Sales $ 718,000 Cost of goods sold 43,000...
Joyner Company’s income statement for Year 2 follows: Sales $ 718,000 Cost of goods sold 230,000 Gross margin 488,000 Selling and administrative expenses 218,000 Net operating income 270,000 Nonoperating items: Gain on sale of equipment 7,000 Income before taxes 277,000 Income taxes 83,100 Net income $ 193,900 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 Assets Cash and cash equivalents $ 123,100 $ 43,500 Accounts receivable 260,000 148,000 Inventory...
Joyner Company’s income statement for Year 2 follows: Sales $ 713,000 Cost of goods sold 287,000 Gross margin 426,000 Selling and administrative expenses 218,000 Net operating income 208,000 Nonoperating items: Gain on sale of equipment 5,000 Income before taxes 213,000 Income taxes 85,200 Net income $ 127,800 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 Assets Cash $ 54,600 $ 45,900 Accounts receivable 276,000 135,000 Inventory 320,000 287,000 Prepaid...
Joyner Company’s income statement for Year 2 follows: Sales $ 715,000 Cost of goods sold 182,000 Gross margin 533,000 Selling and administrative expenses 218,000 Net operating income 315,000 Nonoperating items: Gain on sale of equipment 8,000 Income before taxes 323,000 Income taxes 129,200 Net income $ 193,800 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 Assets Cash and cash equivalents $ 143,500 $ 91,000 Accounts receivable 274,000 123,000 Inventory...
Joyner Company’s income statement for Year 2 follows: Sales $ 708,000 Cost of goods sold 399,000 Gross margin 309,000 Selling and administrative expenses 216,000 Net operating income 93,000 Nonoperating items: Gain on sale of equipment 8,000 Income before taxes 101,000 Income taxes 40,400 Net income $ 60,600 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 Assets Cash and cash equivalents $ 14,900 $ 60,100 Accounts receivable 269,000 147,000 Inventory...
Joyner Company’s income statement for Year 2 follows: Sales $ 701,000 Cost of goods sold 322,000 Gross margin 379,000 Selling and administrative expenses 216,000 Net operating income 163,000 Nonoperating items: Gain on sale of equipment 10,000 Income before taxes 173,000 Income taxes 69,200 Net income $ 103,800 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 Assets Cash and cash equivalents $ 35,000 $ 85,200 Accounts receivable 263,000 127,000 Inventory...
Joyner Company’s income statement for Year 2 follows Sales $ 702,000 Cost of goods sold 219,000 Gross margin 483,000 Selling and administrative expenses 218,000 Net operating income 265,000 Nonoperating items: Gain on sale of equipment 6,000 Income before taxes 271,000 Income taxes 81,300 Net income $ 189,700 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 Assets Cash $ 139,800 $ 69,200 Accounts receivable 263,000 114,000 Inventory 320,000 283,000 Prepaid...
Joyner Company’s income statement for Year 2 follows: Sales $ 700,000 Cost of goods sold 207,000 Gross margin 493,000 Selling and administrative expenses 216,000 Net operating income 277,000 Nonoperating items: Gain on sale of equipment 7,000 Income before taxes 284,000 Income taxes 113,600 Net income $ 170,400 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 Assets Cash $ 120,800 $ 73,300 Accounts receivable 267,000 131,000 Inventory 319,000 276,000 Prepaid...
Joyner Company’s income statement for Year 2 follows: Sales $ 712,000 Cost of goods sold 91,000 Gross margin 621,000 Selling and administrative expenses 216,000 Net operating income 405,000 Nonoperating items: Gain on sale of equipment 6,000 Income before taxes 411,000 Income taxes 123,300 Net income $ 287,700 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 Assets Cash $ 242,200 $ 92,500 Accounts receivable 269,000 114,000 Inventory 320,000 271,000 Prepaid...
Joyner Company’s income statement for Year 2 follows: Sales $ 714,000 Cost of goods sold 365,000 Gross margin 349,000 Selling and administrative expenses 217,000 Net operating income 132,000 Nonoperating items: Gain on sale of equipment 9,000 Income before taxes 141,000 Income taxes 56,400 Net income $ 84,600 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 Assets Cash $ 33,400 $ 81,600 Accounts receivable 262,000 110,000 Inventory 319,000 276,000 Prepaid...
Joyner Company's income statement for Year 2 follows: $ 713,000 160,000 553,000 217,000 336,000 Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items: Gain on sale of equipment Income before taxes Income taxes Net income 7,000 343,000 137,200 $ 205, 800 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 $ 152,000 260,000 320,000 10,000 742,000 634,000 165, 300 468, 700 45,000 $1,255,700...