Question description

Complete “Problem 14-10 Prepare a Statement of Cash Flows; Free Cash Flow” in chapter 14 of Managerial Accounting. Present your responses in an Excel spreadsheet.Complete “Problem 14-10 Prepare a Statement of Cash Flows; Free Cash Flow” in chapter 14 of Managerial Accounting. Present your responses in an Excel spreadsheet.Joyner Company’s income statement for Year 2 follows:Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $900,000Cost of goods sold . . . . . . . . . . . . . . . . . 500,000Gross margin . . . . . . . . . . . . . . . . . . . . . . 400,000Selling and administrative expenses . . . . 328,000Net operating income . . . . . . . . . . . . . . . 72,000Gain on sale of equipment . . . . . . . . . . . 8,000Income before taxes . . . . . . . . . . . . . . . . 80,000Income taxes . . . . . . . . . . . . . . . . . . . . . . 24,000Net income . . . . . . . . . . . . . . . . . . . . . . . $ 56,000Its balance sheet amounts at the end of Years 1 and 2 are as follows:Year 2 Year 1AssetsCash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,000 $ 21,000Accounts receivable . . . . . . . . . . . . . . . . . . 250,000 170,000Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . 310,000 260,000Prepaid expenses . . . . . . . . . . . . . . . . . . . . 7,000 14,000Total current assets . . . . . . . . . . . . . . . . . . . 571,000 465,000Property, plant, and equipment . . . . . . . . . . 510,000 400,000Less accumulated depreciation . . . . . . . . 132,000 120,000Net property, plant, and equipment . . . . . . . 378,000 280,000Loan to Hymans Company . . . . . . . . . . . . . 40,000 0Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $989,000 $745,000Liabilities and Stockholders’ EquityAccounts payable . . . . . . . . . . . . . . . . . . . . $310,000 $250,000Accrued liabilities . . . . . . . . . . . . . . . . . . . . . 20,000 30,000Income taxes payable . . . . . . . . . . . . . . . . . 45,000 42,000Total current liabilities . . . . . . . . . . . . . . . . . . 375,000 322,000Bonds payable . . . . . . . . . . . . . . . . . . . . . . 190,000 70,000Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 565,000 392,000Common stock . . . . . . . . . . . . . . . . . . . . . . 300,000 270,000Retained earnings . . . . . . . . . . . . . . . . . . . . 124,000 83,000Total stockholders’ equity . . . . . . . . . . . . . . 424,000 353,000Total liabilities and stockholders’ equity . . . $989,000 $745,000Equipment that had cost $40,000 and on which there was accumulated depreciation of $30,000was sold during Year 2 for $18,000. The company declared and paid a cash dividend during Year 2.It did not retire any bonds or repurchase any of its own stock.Required:1. Using the indirect method, compute the net cash provided by operating activities for Year 2.2. Prepare a statement of cash flows for Year 2.3. Compute the free cash flow for Year 2.4. Briefly explain why cash declined so sharply during the year.