Question

Joyner Company's income statement for Year 2 follows: $711,000 172, 00G 539,000 216,000 323, 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 6, 000 329, 000 131,600 $197, 400

Answer 1

Solution 1:

Joyner Company
Statement of Cash Flows (Partial)
For year 2
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income	$197,400.00
Adjustments to reconcile net income to net cash provided by operations:
Depreciation Expense ($165,200 - $130,900 + $11,700)	$46,000.00
Gain on sale of equipment	-$6,000.00
Increase in accounts receivables ($271,000 - $131,000)	-$140,000.00
Increase in inventory ($320,000 - $280,000)	-$40,000.00
Decrease in prepaid expenses ($16,000 - $8,000)	$8,000.00
Increase in accounts payable ($315,000 - $265,000)	$50,000.00
Decrease in accrued liabilities ($54,000 - $42,000)	-$12,000.00
Increase in income tax payable ($84,300 - $80,100)	$4,200.00
Net Cash provided by operating activities		$107,600.00

Solution 2:

Joyner Company
Statement of Cash Flows
For year 2
Particulars	Details	Amount
Cash Flow from Operating Activities:
Net Income	$197,400.00
Adjustments to reconcile net income to net cash provided by operations:
Depreciation Expense ($165,200 - $130,900 + $11,700)	$46,000.00
Gain on sale of equipment	-$6,000.00
Increase in accounts receivables ($271,000 - $131,000)	-$140,000.00
Increase in inventory ($320,000 - $280,000)	-$40,000.00
Decrease in prepaid expenses ($16,000 - $8,000)	$8,000.00
Increase in accounts payable ($315,000 - $265,000)	$50,000.00
Decrease in accrued liabilities ($54,000 - $42,000)	-$12,000.00
Increase in income tax payable ($84,300 - $80,100)	$4,200.00
Net Cash provided by operating activities		$107,600.00
Cash Flow from Investing Activities:
Purchase of Property, Plant and Equipment ($636,000 - $512,000 + $30,300)	-$154,300.00
Loan to Hymans Company	-$40,000.00
Sale of equipment	$24,600.00
Net Cash used in Investing activities		-$169,700.00
Cash Flow from Financing Activities:
Proceed from issue of common stock ($342,000 - $287,000)	$55,000.00
Dividend Paid ($99,000 + $197,400 - $261,900)	-$34,500.00
Proceed from issue of bond ($197,000 - $114,000)	$83,000.00
Net Cash Provided by financing activities		$103,500.00
Net Increase / (Decrease) in Cash		$41,400.00
Cash balance at beginning of year		$91,000.00
Cash balance at end of year		$132,400.00

Solution 3:

Free cash flow = Operating cash flow - Capital expenditure - Dividend paid

= $107,600 - $154,300 - $34,500

= -$81,200