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 expenses | 10,000 | 20,000 | |||
| Total current assets | 841,200 | 497,500 | |||
| Property, plant, and equipment | 635,000 | 518,000 | |||
| Less accumulated depreciation | 166,800 | 131,800 | |||
| Net property, plant, and equipment | 468,200 | 386,200 | |||
| Loan to Hymans Company | 40,000 | 0 | |||
| Total assets | $ | 1,349,400 | $ | 883,700 | |
| Liabilities and Stockholders' Equity | |||||
| Accounts payable | $ | 320,000 | $ | 260,000 | |
| Accrued liabilities | 46,000 | 53,000 | |||
| Income taxes payable | 84,700 | 81,700 | |||
| Total current liabilities | 450,700 | 394,700 | |||
| Bonds payable | 208,000 | 115,000 | |||
| Total liabilities | 658,700 | 509,700 | |||
| Common stock | 339,000 | 276,000 | |||
| Retained earnings | 351,700 | 98,000 | |||
| Total stockholders' equity | 690,700 | 374,000 | |||
| Total liabilities and stockholders' equity | $ | 1,349,400 | $ | 883,700 | |
Equipment that had cost $30,800 and on which there was accumulated depreciation of $11,300 was sold during Year 2 for $25,500. 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.
Answer- 1)- Using the indirect method, compute the net cash provided by/used in operating activities for Year 2= ($190000).
Explanation-
| JOYNER COMPANY | ||
| STATEMENT OF CASH FLOWS (USING INDIRECT METHOD) | ||
| FOR THE YEAR ENDED | ||
| Particulars | Amount | |
| $ | ||
| Cash flow from operating activities | ||
| Net Income | 287700 | |
| Adjustments to reconcile net income to net cash provided by operating activities | ||
| Adjustment for non cash effects | ||
| Depreciation | ($166800+$11300-$131800) | 46300 |
| Gain on sale of equipment | -6000 | |
| Change in operating assets & liabilities | ||
| Increase in accounts receivable | -155000 | |
| Increase in inventories | -49000 | |
| Decrease in prepaid expenses | 10000 | |
| Increase in accounts payable | 60000 | |
| Decrease in accrued liabilities | -7000 | |
| Increase in income taxes payable | 3000 | |
| Net cash flow from operating activities | 190000 | |
2)-
| JOYNER COMPANY | ||
| STATEMENT OF CASH FLOWS (USING INDIRECT METHOD) | ||
| FOR THE YEAR ENDED | ||
| Particulars | Amount | |
| $ | ||
| Cash flow from operating activities | ||
| Net Income | 287700 | |
| Adjustments to reconcile net income to net cash provided by operating activities | ||
| Adjustment for non cash effects | ||
| Depreciation | ($166800+$11300-$131800) | 46300 |
| Gain on sale of equipment | -6000 | |
| Change in operating assets & liabilities | ||
| Increase in accounts receivable | -155000 | |
| Increase in inventories | -49000 | |
| Decrease in prepaid expenses | 10000 | |
| Increase in accounts payable | 60000 | |
| Decrease in accrued liabilities | -7000 | |
| Increase in income taxes payable | 3000 | |
| Net cash flow from operating activities (a) | 190000 | |
| Cash Flow from Investing activities | ||
| Equipment sold | 25500 | |
| New equipment purchased | ($635000+$30800-$518000) | -147800 |
| Net cash Flow from Investing activities (b) | -122300 | |
| Cash Flow from Financing activities | ||
| Bonds issued | 93000 | |
| Loan to Hymans Company | -40000 | |
| Common stock issued | 63000 | |
| Cash dividends paid | ($98000+$287700-$351700) | -34000 |
| Net cash Flow from Financing activities (c) | 82000 | |
| Net Change in cash c=a+b+c | 149700 | |
| Beginning cash balance | 92500 | |
| Closing cash balance | 242200 | |
3)- The free cash flow for Year 2 = $8200
Calculation of Free cash flow :-
Net cash flow provided by operating activities= $190000
Capital Expenditures ($147800)
Dividends ($34000)
Free cash flow $8200
Joyner Company’s income statement for Year 2 follows: Sales $ 712,000 Cost of goods sold 91,000...
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 $ 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 $ 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 $ 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...
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 $ 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: Sales $ 714,000 Cost of goods sold 84,000 Gross margin 630,000 Selling and administrative expenses 217,000 Net operating income 413,000 Nonoperating items: Gain on sale of equipment 7,000 Income before taxes 420,000 Income taxes 126,000 Net income $ 294,000 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Year 1 Assets Cash and cash equivalents $ 234,000 $ 69,900 Accounts receivable 250,000 114,000 Inventory...