Question

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 $ 47, 400 138,000 286,000 20,000 491,400 519,000 131, 400 387,600 $879,000 Assets Cash and cash equivalents Accounts receivable Inventory Prepaid expenses Total current assets Property, plant, and equipment Less accumulated depreciation Net property, plant, and equipment Loan to Hymans Company Total assets Liabilities and Stockholders' Equity Accounts payable Accrued liabilities Income taxes payable Total current liabilities Bonds payable Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity $ 311,000 41,000 85,200 437,200 199,000 636, 200 347,000 272,500 619,500 $1,255,700 $252,000 52,000 81,000 385,000 115,000 500,000 281,000 98,000 379,000 $879,000

Answer 1

1.

JOYNER COMPANY
Statement of Cash Flows-Indirect Method (partial)
Net income		205800
Adjustments to reconcile net income to net cash provided by operations:
Depreciation expense	44200
Gain on sale of equipment	-7000
Increase in Accounts Receivable	-122000
Increase in Inventory	-34000
Decrease in Prepaid expenses	10000
Increase in Accounts payable	59000
Decrease in Accrued liabilities	-11000
Increase in Income taxes payable	4200	-56600
Net cash provided by operating activities		149200

2.

JOYNER COMPANY
Statement of Cash Flows
For Year 2
Operating Activities:
Net cash provided by operating activities		149200
Investing Activities:
Sale proceeds of equipment	28500
Purchase of equipment	-146800
Loan to Hymans Company	-45000
Net cash used by investing activities		-163300
Financing Activities:
Issue of bonds payable	84000
Issuance of Common stock	66000
Payment of cash dividends	-31300
Net cash provided by financing activities		118700
Net increase (decrease) in cash		104600
Beginning cash and cash equivalents		47400
Ending cash and cash equivalents		152000

Working:

		Beg. Bal.	131400
On equip. sold	10300	Depreciation	44200
		End. Bal.	165300
Property, Plant, and Equipment
Beg. Bal.	519000
Purchase	146800	Equip. sold	31800
End. Bal.	634000
Retained Earnings
		Beg. Bal.	98000
Dividends paid	31300	Net income	205800
		End. Bal.	272500

3. Free cash flow = Net cash flow from operating activities - Capital expenditure = $149200 - $146800 = $2400