Problem 14-10 Prepare a Statement of Cash Flows; Free Cash Flow [LO14-1, LO14-2,
ID: 2579878 • Letter: P
Question
Problem 14-10 Prepare a Statement of Cash Flows; Free Cash Flow [LO14-1, LO14-2, LO14-3]
Joyner Company’s income statement for Year 2 follows:
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
Equipment that had cost $31,700 and on which there was accumulated depreciation of $11,100 was sold during Year 2 for $28,600. 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.
Sales $ 711,000 Cost of goods sold 229,000 Gross margin 482,000 Selling and administrative expenses 216,000 Net operating income 266,000 Nonoperating items: Gain on sale of equipment 8,000 Income before taxes 274,000 Income taxes 82,200 Net income $ 191,800 Safari File Edit View History Bookmarks window Help 18% D Sun 26 Nov 10:22:29 AM Q newconnect.mheducation.com Urbelievers Floor Plans Apex Connect Prepare a Chegg Chapter 14 Homework G Saved Help Save & Exit Submit Check my work 5 Complete this question by entering your answers in the tabs below Required 1Required 2 Required 3 eBook Using the indirect method, compute the net cash provided by/used in operating activities for Year 2. (List any deduction in cash and cash outflows as negative amounts.) Weaver Company Statement of Cash Flows-Indirect Method Required 2> 26Explanation / Answer
1) Statement of cash flow -Indirect Method (Partial) Net income for the year 191,800 Adjustments to reconcile net income Depreciation expense (165,200 - (130600-11,100) 45700 Gain on sale of Equipment -8,000 increase in accounts receivable -139000 increase in inventory -36000 Decrease in prepaid expense 8500 increase in accounts payable 67000 decrease in accrued liabilities -3000 increase In income taxes payable 5000 -59800 Net cash flow from operating activities 132,000 2) Statement of cash flow operating activities Net cash flow from operating activities 132,000 Investing activities Cash from sale of Equipment 28,600 cash paid for purchase of Equipment -148,700 loan to Hymans company -48,000 Net cash used by investing activities -168,100 -168,100 Financing activities Cash from bonds issue 87,000 cash from common stock issue 68000 Cash dividend -31,900 cash provided by financing activities 123,100 123,100 Net increase in cash 87,000 cash at the beginning of the year 60,400 cash at year end 147,400 3) Free cash flow = cash from operating activities-capital expenditure = 132,000 - 148,700 -16700