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Prepare a Statement of Cash Flows (Indirect Method...

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Prepare a Statement of Cash Flows (Indirect Method); Free Cash Flow [LO2, LO3, LO4] Balance sheet accounts for Joyner Company contained the following amounts at the end of Years 1 and 2: BALANCE SHEET ATTACHED AS A FILE The 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 Equipment that had cost $40,000 and on which there was accumulated depreciation of $30,000 was sold during Year 2 for $18,000. Cash dividends totaling $15,000 were declared and paid during Year 2. Required: 1. Using the indirect method, compute the net cash provided by operating activities for Year 2. 2. Prepare a statement of cash fl ows for Year 2. 3. Compute the free cash fl ow for Year 2. 4. Briefl y explain why cash declined so sharply during the year.

 

Paper#3294 | Written in 18-Jul-2015

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