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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...

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
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.

Solution 1
Net Cash provided by Operating Expenses
Net Cash provided by Operating Expenses
Net Income to reconcile net income to net cash flow from
operating activities
Depreciation...

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