Problem 14-10 Prepare a Statement of Cash Flows; Free Cash Flow [LO14-1, LO14-2,
ID: 2580165 • Letter: P
Question
Problem 14-10 Prepare a Statement of Cash Flows; Free Cash Flow [LO14-1, LO14-2, L014-3] Joyner Company's income statement for Year 2 follows: Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Nonoperating items: $702,000 215,000 487,000 218,000 269,000 Gain on sale of equipment Income before taxes Income taxes Net income 8,000 277,000 110,800 $166,200 Its balance sheet amounts at the end of Years 1 and 2 are as follows Year 2 Year 1 AssetsS Cash Accounts receivable Inventory Prepaid expenses Total current assets Property, plant, and equipment $ 147,200 61,400 256,000 145,000 320,000 274,000 19,000 732,700 499,400 624,000 517,000 165,400 130,900 9,500 Less accumulated depreciation Net equipment Loan to Hymans Company Total assets Liabilities and Stockholders Equity Accounts payable Accrued liabilities Income taxes payable Total c Bonds payable Total liabilities Common stock Retained earnings Total stockholders' equity Total liabilities and stockholders' equity property, plant, and 458,600 386,100 41,000 $1,232,300 $885,500 $ 316,000 $264,000 51,000 81,500 448,700 396,500 206,000 112, 000 654,700 508,500 345,000 280,000 97,000 577,600 377,000 48,000 84,700 urrent liabilities 232,600 $1,232,300 $885,500 Equipment that had cost $30,900 and on which there was accumulated depreciation of $10,400 was sold during Year 2 for $28,500. 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 Complete this question by entering your answers in the tabs belowExplanation / Answer
1) Joyner Company Statement of Cash Flows (Indirect method-Partial) Amount $ Operating Activities Net Income 1,66,200 Adjustments: Non-Cash adjustment: Depreciation (165400+10400-130900) 44,900 Gain on sale of equipment -8,000 Income Tax expenses 1,10,800 Due to changes in Working capital Due to changes in accounts receivable (256000-145000) -1,11,000 Due to changes in Inventories (320000-274000) -46,000 Due to changes in accounts payable (316000-264000) 52,000 Due to changes in prepaid expenses (9500-19000) 9,500 Due to changes in accruals (48000-51000) -3,000 Taxes paid (81500+110800-84700) -1,07,600 Net Cash provided (used) by operating activities 1,07,800 2) Joyner Company Statement of Cash Flows (Indirect method-Partial) Amount $ Operating Activities Net Income 1,66,200 Adjustments: Non-Cash adjustment: Depreciation (165400+10400-130900) 44,900 Gain on sale of equipment -8,000 Income Tax expenses 1,10,800 Due to changes in Working capital Due to changes in accounts receivable (256000-145000) -1,11,000 Due to changes in Inventories (320000-274000) -46,000 Due to changes in accounts payable (316000-264000) 52,000 Due to changes in prepaid expenses (9500-19000) 9,500 Due to changes in accruals (48000-51000) -3,000 Taxes paid (81500+110800-84700) -1,07,600 Net Cash provided (used) by operating activities 1,07,800 Investing Activities Cash used to acquire equipment (624000+30900-517000) -1,37,900 Cash receipts from sale of equipment 28,500 Due to change in Loans & advances -41,000 Net cash provided (used) by investing activities -1,50,400 Financing Activities Due to change in bonds payable (206000-112000) 94,000 Due to change in common stock (345000-280000) 65,000 Payment of common dividends (166200-(232600-97000)) -30,600 Net cash provided (used) by investing activities) 1,28,400 Net increase/decrease in cash 85,800 Add: Cash balance at the begining of the year 61,400 Cash balance at the end of the year 1,47,200 3) Free Cash Flow = Net Cash Flow From Operations - Capital Expenditures Net Cash Flow From Operations = $107800 Net of capital expenditure = -$150400 Free cash flow = $107800-$150400 = $42600