Joyner Companys income statement for Year 2 follows 706000 S

Joyner Company\'s income statement for Year 2 follows: $706,000 Sales Cost of goods sold Gross margin Selling and administrative expenses 313,000 217,000 Net operating income Gain on sale of equipment 96,000 9,000 Income before taxes Income taxes 105,000 42,000 Net income 63,000 Its balance sheet amounts at the end of Years 1 and 2 are as follows: Year 2 Assets Cash $ 200 103,800 267,000 116,000 319,000 272,000 10,500 21,000 Inventory Prepaid expenses Total current assets 596,300512,800 Property, plant, and equipment 636,000518,000 166,200 130,600 Less accumulated depreciation Net property, plant, and equipment Loan to Hymans Company 469,800 387,400 42,000 Total assets $1,108,100 $900.200 Liabilities and Stockholders\' Equity

Solution

1) Calculation of net cash from operating activities for year 2 (Amts in $)

2) Joyner Company

Statement of Cash Flows-Indirect method

For Year 2 (Amounts in $)

3) Free cash flow for year 2 = Cash flow from Operating activities+Cash flows from investing act.

= ($44,100)+($162,700) = ($206,800)

Thus there is a negative free cash flows of $206,800.

Operating Activities:
Net Income		63,000
Adjustment to convert net income to cash basis:
Add: Depreciation exp (Acc. dep. ending bal+Dep on equipment sold-Acc dep. Beg. bal) (166,200+11,700-130,600)	47,300
Less: Gain on sale of equipment	(9,000)
Less: Increase in Accounts Receivable (267,000-116,000)	(151,000)
Less: Increase in Inventory (319,000-272,000)	(47,000)
Add: Decrease in Prepaid Expenses (10,500-21,000)	10,500
Add: Increase in Accounts Payable (311,000-268,000)	43,000
Less: Decrease in Accrued Liabilities (50,000-55,000)	(5,000)
Add: Increase in income taxes payable (84,300-80,200)	4,100	(107,100)
Net Cash Used for Operating Activities		(44,100)