Chapter 13, Problem 10P

Prepare a Statement of Cash Flows; Free Cash
Joyner Company's income statement for Year 2 follows:

Its balance sheet amounts at the end of Years 1 and 2 are as follows:

Equipment that had cost $40,000 and on which there was accumulated depreciation of $30_:000 was 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 1.
4. Briefly explain why cash declined so sharply during the year.