Question

Jayner Company's income statement for Year 2 follows: Sales Cost of goods sold S 713,000 77,000 Gross margin Selling and administrative expenses 638.000 216,000 Net operating income Gain on sale of equipment 420.000 7,000 427,000 Income before taxes Income taxes 128.100 Net income S 298.900 Its balance sheet amounts at the end of Years 1 and 2 are as follows. Year 2 Year 1 Asseta Cash Accounts receivable Inventory Prepaid expenses S 265,100 252,000 320.000 10.000 $ 87,700 117,000 285.000 20,000 Total current assets 847,100 509,700 Property, plant, and equipment Less accumulated depreciation 625,000 168,700 501.000 131,400 Net property, plant and equipment 458,300 369,800 Loan to Hymans Company 48,000 Total assets $1,353,400 $ 879,300 Llabilities and stockholders' Equity Accounts payable Accrued liabilities Income taxes payable S 317.000 46.000 84,300 S 253.000 59.000 1,300 Total current abilities Bands payable 447,300 200.000 393.300 115.000 Total liabilities 647,300 508,300 Common stock Retained earnings 340.000 368.100 272.000 99.000 Total stockholders' equity 708, 100 371.000 Total liabilities and stockholders' equity $1,353,400 $ 879,300 Equipment that had cost $30.600 and on which there was accumulated depreciation of S10,300 was sald during Year 2 for $27,300. 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 for operating activities for Year 2. (Negative amount should be indicated by a minue algn.)

Answer 1

1. Net cash for operating activities = 231500

2.

Joyner Company
Statement of Cash Flows
For Year 2
Operating activities:
Net income		298900
Adjustments to convert net income to cash basis:
Depreciation	45600
Increase in accounts receivable	-135000
Increase in inventory	-35000
Decrease in prepaid expenses	10000
Increase in accounts payable	64000
Decrease in accrued liabilities	-13000
Increase in income taxes payable	3000
Gain on sale of equipment	-7000	-67400
Net cash provided by operating activities		231500
Investing activities:
Proceeds from sale of equipment	27300
Loan to Hymans Company	-48000
Additions to plant and equipment	-154600
Net cash used in investing activities		-175300
Financing activities:
Issuance of bonds payable	85000
Issuance of common stock	68000
Cash dividends	-31800
Net cash provided by financing activities		121200
Net decrease in cash		177400
Beginning cash and cash equivalents		87700
Ending cash and cash equivalents		265100

3. Free cash flow = 231500 -175300 = 56200