Compute the net cash provided by operating activities

Reference no: EM131623244

Statement of Cash Flows Assignment

Prepare a Statement of Cash Flows; Free Cash Flow. Present your responses in an Excel spreadsheet. Joyner Company's income statement for Year 2 follows:

Sales ................................................................... $900,000

Cost of goods sold ................................ 500,000

Gross margin ........................................... 400,000

Selling and administrative expenses .......... 328,000

Net operating income ................................. 72,000

Gain on sale of equipment .......................... 8,000

Income before taxes .................................. 80,000

Income taxes ....................................................... 24,000

Net income ......................................... $ 56,000

Its balance sheet amounts at the end of Years 1 and 2 are as follows:

Assets	Year 2	Year 1
Cash ..........................................................	$ 4,000	$ 21,000
Accounts receivable ..................................	250,000	170,000
Inventory ......................................	310,000	260,000
Prepaid expenses .....................................	7,000	14,000
Total current assets ...................................	571,000	465,000
Property, plant, and equipment .................	510,000	400,000
Less accumulated depreciation ..............	132,000	120,000
Net property, plant, and equipment ...........	378,000	280,000
Loan to Hymans Company..........................	40,000	0
Total assets ...............................................	$989,000	$745,000
Liabilities and Stockholders' Equity
Accounts payable ......................................	$310,000	$250,000
Accrued liabilities .........................................	20,000	30,000
Income taxes payable ................................	45,000	42,000
Total current liabilities ................................	375,000	322,000
Bonds payable ...............................	190,000	70,000
Total liabilities.............................................	565,000	392,000
Common stock ...............................	300,000	270,000
Retained earnings .....................................	124,000	83,000
Total stockholders' equity ..........................	424,000	353,000
Total liabilities and stockholders' equity .....	$989,000	$745,000

Equipment that had cost $40,000 and on which there was accumulated depreciation of $30,000 was sold during Year 2 for $18,000. 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 operating activities for Year 2.

2. Prepare a statement of cash flows for Year 2.

3. Compute the free cash flow for Year 2. 4. Briefly explain why cash declined so sharply during the year.

Reference no: EM131623244

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