Equipment that had cost $30,600 and on which there was accumulated depreciation

Question

     Equipment that had cost $30,600 and on which there was accumulated depreciation of $10,000 was sold during Year 2 for $26,600. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock.

Using the indirect method, compute the net cash for operating activities for Year 2. (Negative amount should be indicated by a minus sign.)

  

Prepare a statement of cash flows for Year 2. (List any deduction in cash and cash outflows as negative amounts.)

  

Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign.)

Joyner Company’s income statement for Year 2 follows:

Explanation / Answer

1Using the indirect method, compute the net cash for operating activities for Year 2

2

Prepare a statement of cash flows for Year 2.

Operating activities: Net income 115500 Adjustments to convert net income to cash basis: Depreciation charges 44800 Increase in accounts receivable -141000 Increase in inventory -37000 Decrease in prepaid expenses 9500 Increase in accounts payable 49000 Decrease in accrued liabilities -7000 Gain on sale of equipment -6000 Increase in deferred income taxes 5000 -82700 Net cash provided by operating activities 32800

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