Equipment that had cost $31,500 and on which there was accumulated depreciation

Question

     Equipment that had cost $31,500 and on which there was accumulated depreciation of $10,600 was sold during Year 2 for $29,900. 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 flow from OPerating activities is $ 159,900

2.

Statement of cash flow:

Working:

Joyner Company Cash flow Statement Cash flow from operating activities: Amount ($) Net Income 243,000 Adjustment: Depreciation 45,300 Gain on sale of Equipment (9,000) Increase in accounts Receivable (135,000) Increase in inventory (40,000) Decrease in prepaid expenses 9,500 Increase in accounts Payable 60,000 Decrease in accrued liabilities (16,000) Increase in incometax payable 2,100 Cash flow from Operating activities 159,900

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