Question

The following financial statements and additional information are reported Exerciso 12-11 Indirect: Preparation of statement of cash flows IKIBAN INC Comparative Balance Sheets June 30,2015 and 2014 Pl P2 P3 A1 Assets Cash Accounts recelvable, net nventory $87 500 $4000 65,000 51,00 63,800 86,500 expenses 4402-5 IKIBAN INC Income Statement Total current asses220,700186,00 For Year Ended June 30,20IS Equipment 124,000 11$,000 $678.000 Accum depreciation-Equipment..009 .00 267000 bilie and Equity ales Cost of goods sold 7,700 411,000 Operating experses Accounts payabSle.. . 25,000 30,000 6,000 15,000 3.400 Income txxes payable Other expenses Toral operating oxpenses... 67,000 141,400Notes pgable (long term). Total liablities Common stock $5 par value Total labliries and equity Other gains (losses) Income before taxes . Income taxes oxpense Net Income 2,000Equity 43,400 43,890 220,000 160,000 Additional Information Check iti Cash peid for dividends, $90,310 a. A $30,000 mote payable is retired at its $30,000 carrying (bool) value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends equipment is acquired for $57,600 cash. Received cash for the sale of equipment that had cost $48,600, yielding a $2,000-gain. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. l parcbases and sales of inventory are on credit uired epare a statement of cash flows for the year eaded June 30, 2015, using the indirect method

Answer 1

In cash flow statement, there are three types of cash flow viz., cash flow from operating activities, cash flow from investing activities and cash flow from financing activities. Cash flow from operating activities are the cash flow from day to day operations of the business. Cash flow from investing activities are cash flows from purchase and sale of assets and investments. Cash flow from financing activities are the cash flow from issue or redemption of shares, loan repayment, interest on loan, dividend payment.

In indirect method, the cash flow from operating activities are calculated as adjusting net profit after tax for non-cash and non-operating items included in the profit and loss account. Then it is also adjusted for the changes in current assets and curren liabilities. If there is increase in current asset or decrease in current liability, it should be subtracted from net profit. If there is increase in current liability or decrease in current asset, the it should be added to the net profit.

Statement of cash flows Particulars Amount (Amount () Amount (S) Net profit during the year 99,510 Depreciation exenses 58,600 (2,000) 1,56,110 Gain on sale of equipment liabilities Less: Increase in accounts receivable Add: Decrease in inventories Add: Decrease in prepaid expenses Less: Decrease in accounts payable Less: Decrease in wages payable Less: Decrease in income tax payable Cash flow from operating activities (14,000) 22,700 1,000 (5,000) (9,000) (400) 1,51,410 Sale of Equipment (Refer note below) Purchase of Equipment Cash used in investing activities 10,000 (57,600) (47,600) Repayment of note Issue of shares Dividend paid (Refer note below) Cash used in financing activities Net change in cash flows Cash at the beginning of the period Cash at the end of the period (30,000) 60,000 (90,310) (60,310) 43,500 44,000 87,500

Opening Accumulated depreciation Depreciation for the vear Total Balance of accumulate depreciation on closing Accumulated depreciation on asset sold 9,000 58,600 67,600 27,000 40,600 Cost of the asset Less: Accumulated depreciation Written down value of the asset Add: Gain on sale Sale proceeds of old equipment 48,600 (40,600) 8,000 2,000 10,000 Opening retained earnings Add: Income for the year Total Less: Closing retained earnings Dividend paid is balance. 24,100 99,510 1,23,610 (33,300) 90,310