Question

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The following financial statements and additional information are reported. 2018 IKIBAN INC. Comparative Balance Sheets June 30, 2019 and 2018 2019 Assets Cash $ 87,500 Accounts receivable, net 65,000 Inventory 63,800 Prepaid expenses 4,400 Total current assets 220,700 Equipment 124,000 Accum. depreciation-Equipment (27,000) Total assets $317,700 Liabilities and Equity Accounts payable $ 25,000 Wages payable 6,000 Income taxes payable 3,400 Total current liabilities 34,400 Notes payable (long term) 30,000 Total liabilities 64,400 Equity Common stock, $5 par value 220,000 Retained earnings 33,300 Total liabilities and equity $31.700 $ 44,000 51,000 86,500 5,400 186,900 115,000 (9,000) $292,900 $ 30,000 15,000 3,800 48,800 60,000 108,800 160,000 24,100 $ 292,900 IKIBAN INC. Income Statement For Year Ended June 30, 2019 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $58,600 Other expenses 67,000 Total operating expenses $678,000 411,000 267,000 125,600 141,400 Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense Net income 2,000 143,400 43,890 $ 99,510

Answer 1

Answer -

IKIBAN, INC.
Statement of Cash Flows (Indirect Method)
For Year Ended June 30, 2019
Cash flows from operating activities:
Net income	$99510
Adjustments to reconcile net income to net cash provided by operating activities
Income statement items not affecting cash:
Depreciation expense	$58600
Gain on sale of plants assets	($2000)
Changes in current operating assets and liabilities:
Increase in accounts receivable	($14000)
Decrease in inventory	$22700
Decrease in prepaid expenses	$1000
Decrease in accounts payable	($5000)
Decrease in wages payable	($9000)
Decrease in income taxes payable	($400)
Net cash provided by operating activities		$151410
Cash flows from investing activities:
Cash received from sale of equipment	$10000
Cash paid for equipment	($57600)
Net cash used in investing activities		($47600)
Cash flows from financing activities:
Cash received from stock issuance	$60000
Cash paid to retire notes	($30000)
Cash paid for dividend	($90310)
Net cash used in financing activities		($60310)
Net increase (decrease) in cash		$43500
Cash balance at prior year-end		$44000
Cash balance at current year-end		$87500

Calculation:

1. Increase in accounts receivable:

= Prior year accounts receivable - Current year accounts receivable

= $51000 - $65000 = ($14000)

2. Decrease in inventory:

= Prior year inventory - Current year inventory

= $86500 - $63800 = $22700

3. Decrease in prepaid expenses:

= Prior year prepaid expenses - Current year prepaid expenses

= $5400 - $4400 = $1000

4. Decrease in accounts payable:

= Current year accounts payable - Prior year accounts payable

= $25000 - $30000 = ($5000)

5. Decrease in wages payable:

= Current year wages payable - Prior year wages payable

= $6000 - $15000 = ($9000)

6. Decrease in income taxes payable:

= Current year income taxes payable - Prior year income taxes payable

= $3400 - $3800 = ($400)

7. Cash received from sale of equipment:

Accumulated depreciation on sale of equipment that had cost $48600

= Prior year accumulated depreciation + Depreciation expense - Current year accumulated depreciation

= $9000 + $58600 - $27000 = $40600

So,

Cash received from sale of equipment:

= Cost of equipment - Accumulated depreciation + Gain on sale of equipment

= $48600 - $40600 + $2000 = $10000

8. Cash received from stock issuance:

= Current year common stock - Prior year common stock

= $220000 - $160000 = $60000

9. Cash paid for dividend:

= Prior year retained earnings + Net income - Current year retained earnings

= $24100 + $99510 - $33300 = $90310