Question

Joyner Company’s income statement for Year 2 follows:

 

Sales	$	703,000
Cost of goods sold		109,000
Gross margin		594,000
Selling and administrative expenses		151,700
Net operating income		442,300
Nonoperating items:
Gain on sale of equipment		9,000
Income before taxes		451,300
Income taxes		135,390
Net income	$	315,910

 

Its balance sheet amounts at the end of Years 1 and 2 are as follows:

 

	Year 2			Year 1
Assets
Cash and cash equivalents	$	294,410		$	55,900
Accounts receivable		228,000			141,000
Inventory		318,000			289,000
Prepaid expenses		10,000			20,000
Total current assets		850,410			505,900
Property, plant, and equipment		639,000			508,000
Less accumulated depreciation		165,300			130,200
Net property, plant, and equipment		473,700			377,800
Loan to Hymans Company		46,000			0
Total assets	$	1,370,110		$	883,700
Liabilities and Stockholders' Equity
Accounts payable	$	311,000		$	262,000
Accrued liabilities		49,000			57,000
Income taxes payable		84,200			80,700
Total current liabilities		444,200			399,700
Bonds payable		209,000			105,000
Total liabilities		653,200			504,700
Common stock		340,000			287,000
Retained earnings		376,910			92,000
Total stockholders' equity		716,910			379,000
Total liabilities and stockholders' equity	$	1,370,110		$	883,700

 

Equipment that had cost $31,500 and on which there was accumulated depreciation of $10,400 was sold during Year 2 for $30,100. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock.

 

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.