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

1. Cash flows from operating activities: Indirect method

2. Statement of cash flows for Year 2:

3. Free cash flow for Year 2 = Cash flow from operating activities - Net cash used in investing activities = $ 32,800 - $ 118,000 = -$ 85,200

$ $ Cash flows from operating activities Income before taxes 165,000 Adjustments for non-cash and non-operating items: Depreciation expense 44,800 Gain on sale of equipment (6,000) 38,800 Operating profit before working capital changes 203,800 Increase in accounts receivable (141,000) Increase in inventory ( 37,000) Decrease in prepaid expenses 9,500 Increase in accounts payable 49,000 Decrease in accrued liabilities (7,000) (126,500) Cash flows from operations before income taxes 77,300 Income taxes paid 44,500 Net cash flow from operating activities 32,800

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.