Question

The following financial statements and additional information are reported. 2015 IKIBAN INC. Comparative Balance Sheets June 30, 2016 and 2015 2016 Assets Cash $ 116,500 Accounts receivable, net 69,600 Inventory 66,500 Prepaid expenses 6,100 Total current assets $ 258,700 Equipment 126,900 Accum. depreciation-Equipment (28,900) Total assets $ 356.700 Liabilities and Equity Accounts payable $ 26,100 Wages payable 7.400 Income taxes payable 2.500 Total current liabilities $ 36,000 Notes payable (long term) 57,000 Total liabilities $ 93,000 Equity Common stock, $5 par value 239,000 Retained earnings 24,700 Total liabilities and equity $ 356,700 $ 67,100 51,800 96,600 4,200 $ 219,700 115,000 (10,900) $ 323,800 $ 32,800 16,000 4.000 $ 52,800 77,000 $ 129,800 186,000 8,000 $ 323,800 IKIBAN INC. Income Statement For Year Ended June 30, 2016 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 58,100 Other expenses 66,200 Total operating expenses $ 671,000 408,000 263,000 124,300 130 700

Answer 1

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IKIBAN INC.
Statement of Cash Flows (Direct Method)
For the Year Ended June 30, 2016
Cash Flows from Operating Activities
Cash received from customers	653200
Cash paid for inventory	-384600
Cash paid for operating expenses	-76700
Cash paid for income taxes	-58060
Net cash provided by operating activities		133840
Cash Flows from Investing Activities
Purchase of equipment	-61200
Sale proceeds from equipment	11900
Net cash used by investing activities		-49300
Cash Flows from Financing Activities
Retirement of note payable	-20000
Issuance of Common stock	53000
Payment of cash dividends	-68140
Net cash used by financing activities		-35140
Net increase in cash		49400
Cash balance, June 30, 2015		67100
Cash balance, June 30, 2016		116500

Working:

Cash received from customers
Sales	671000
Less: Increase in Accounts Receivable	17800
	653200
Cash paid for inventory
Cost of goods sold	408000
Add: Decrease in Accounts Payable	6700
Less: Decrease in Inventory	30100
	384600
Cash paid for operating expenses
Other expenses	66200
Add: Decrease in Wages payable	8600
Add: Increase in prepaid expenses	1900
	76700
Cash paid for income taxes
Income tax expense	56560
Add: Decrease in income taxes payable	1500
	58060

Cash dividends paid = Beginning balance of retained earnings + Net income - Ending balance of retained earnings = $8000 + $84840 - $24700 = $68140

Sale proceeds from equipment:

Accumulated depreciation reversed on equipment sold = Beginning balance of Accumulated depreciation + Depreciation expense - Ending balance of Accumulated depreciation = $10900 + $58100 - $28900 = $40100

Book value of equipment sold = Cost - Accumulated depreciation = $49300 - $40100 = $9200

Sale proceeds = Book value + Gain on sale = $9200 + $2700 = $11900