Question

The following financial statements and additional information are reported. IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016 2017 2016 Assets Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets Liabilities and Equity Accounts payable Wages payable Income taxes payable Total current liabilities F- Notes payable (long term) Total liabilities Equity Common stock, $5 par value Retained earnings Total liabilities and equity $ 87,500 65,000 63.800 4,400 220,700 124,000 (27,000) $ 44,000 51,000 86,500 5,400 186.900 115,000 (9,000) $292,900 $317,700 25,000 6,000 3,400 34,400 30.000 64,400 30,000 15,000 3,800 48.800 60,000 108.800 220,000 33,300 160.000 24,100 $317,700 $292,900 IKIBAN INC. Income Statement For Year Ended June 30, 2017 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense Other expenses $678,000 411,000 267,000 $58,600 67,000 125,600 Total operating expenses 141,400 Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense 2,000 143,400 43,890 $ 99,510 Net income Additional Information A note payable is retired at its carrying (book) value in exchange for cash. a. The only changes affecting retained earnings are net income and cash dividends paid. New equipment is acquired for cash. Received cash for the sale of equipment that had cost $48,600, yielding a $2,000 gain. b. c. d. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement e. Required: Prepare a statement of cash flows for the year ended June 30, 2017, using the indirect method

Answer 1

Answer:

IKIBAN INC. Statement of Cash Flows For the Year ended June. 30, 2017 Cash Flows from Operating Activities $99,510 Net Income Adjustment to reconcile net income to Net cash provided by Operating Activities Add, Depreciation $58,600 -$2,000 -$14,000 $22,700 $1,000 -$5,000 -$9,000 -$400 Less, Gain on sale of equipment Add, Decrease/(Increase) in Account Receivables Add, Decrease/(Increase) in Inventory Add, Decrease/(Increase) in Prepaid expenses Add, Increase (Decrease) in Account payable Add, Increase /(Decrease) in Wages payable Add, Increase/(Decrease) in Income Tax payable $51,900 Cash flow from Operating Activities $151,410 Cash Flows from Investing Activities -$57,600 $10,000 Purchase of Equipment Sale proceeds of Equipment -$47,600 Cash flow from Investing Activities Cash Flows from Financing Activities $60,000 -$30,000 -$90,310 Issue of common stock Notes payable retired Dividend paid -$60,310 Cash flow from Financing Activities $43,500 Change in Cash flow $44,000 Cash Balance, Jun 30, 2016 $87,500 Cash Balance, Jun 30, 2017

Calculations:

Dividend paid = Retained earnings as at Jun 30 2016 + Net Income - Retained earnings as at Jun 30 2017

= 24100 + 99510 - 33300

= $90,310

Purchase of new equipment = Gross value of equipment as at Jun 30 2017 - (Gross value of equipment as at Jun 30 2016 - Gross value of equipment sold)

= 124000 - (115000 - 48600)

= $57,600

Sale value of old equipment = Gross value of equipment sold - (Accumulated depreciation Jun 30 2016 + Depreciation in 2017 - Accumulated depreciation Jun 30 2017) + Gain on sale of equipment

= 48600 - (9000 + 58600 - 27000) + 2000

= $10,000