Reference no: EM132747284
Question - Joyner Company's income statement for Year 2 follows:
Joyner Company's Income Statement
Sales $797,000
Cost of goods sold 401,000
Gross margin 396,000
Selling and administrative expenses 231,000
Net operating income 165,000
Non-operating items:
Gain on sale of equipment 7,000
Income before taxes 172,000
Income taxes 68,800
Net income $103,200
Its balance sheet amounts at the end of Years 1 and 2 are as follows:
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Joyner Company's Balance Sheet
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Year 2
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Year 1
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Assets
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|
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Cash
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$91,600
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$179,000
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Accounts receivable
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266,000
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145,000
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Inventory
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319,000
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282,000
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Prepaid expenses
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8,500
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17,000
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Total current assets
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685,100
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623,000
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Property, plant, and equipment
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543,000
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384,000
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Less accumulated depreciation
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165,400
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131,400
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Net property, plant, and equipment
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377,600
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252,600
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Loan to Hymans Company
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87,000
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0
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Total assets
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$1,149,700
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$875,600
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Liabilities and Stockholders' Equity
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|
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Accounts payable
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311,000
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258,000
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Accrued liabilities
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46,000
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52,000
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Income taxes payable
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85,000
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81,600
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Total current liabilities
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442,000
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391,600
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Bonds payable
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199,000
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114,000
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Total liabilities
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641,000
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505,600
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Common stock
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339,000
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273,000
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Retained earnings
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169,700
|
97,000
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Total stockholders' equity
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508,700
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370,000
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Total liabilities and stockholders' equity
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$1,149,700
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$875,600
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Equipment that had cost $30,500 and on which there was accumulated depreciation of $11,400 was sold during Year 2 for $26,100. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock.
Sam Conway, president of the company, considers $95,600 to be the minimum cash balance for operating purposes. As can be seen from the balance sheet data, only $91,600 in cash was available at the end of the current year. The sharp decline is puzzling to Mr. Conway, particularly because sales and profits are at a record high.
Required -
1. Using the direct method, adjust the company's income statement to a cash basis for Year 2.
2. Using the data from (1) above and other data from the problem as needed, statement of cash flows for Year 2.