Question

2018 IKIRAN INC. Comparative Balance Sheets June 30, 2019 and 2018 2019 Assets Cash $ 96,700 Accounts receivable, net 92,000 Inventory 81,800 Prepaid expenses 6,200 Total current assets 276,700 Equipment 142,000 Accum. depreciation Equipment (36.000) Total assets $382,700 Liabilities and Equity Accounts payable $ 43,000 Wages payable 7,800 Income taxes payable 5,200 Total current liabilities 56,000 Notes payable (long term) 48,000 Total liabilities 104,000 Equity Common stock, $5 par value 256.000 Retained earnings 22,700 Total liabilities and equity $382,700 $ 62.000 69,000 113,500 9,000 253, 500 133,000 (18.000) $368,500 $ 57,000 18,600 7.400 83,000 78,000 161,000 178,000 29,500 $368,500 IKIDAN INC. Income Statement For Year Ended June 30, 2019 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $76,600 Other expenses 85,000 Total operating expenses $768,000 429,000 339,000 161,600 177,400 - 3,800 Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense Net income 181,200 45,690 $135,510 Additional Information a. A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New equipment is acquired for $75,600 cash. d. Received cash for the sale of equipment that had cost $66,600, yielding a $3,800 gain. e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. f. All purchases and sales of inventory are on credit. Required: (1) Prepare a statement of cash flows using the indirect method for the year ended June 30, 2019. (Amounts to be deducted should be indicated with a minus sign.) Answer is not complete. IKIBAN, INC. Statement of Cash Flows (Indirect Method) For Year Ended June 30, 2019 Cash flows from operating activities Net Income $ 135,510 Adjustments to reconcile not income to not cash provided by operating activities Income statement items not affecting cash Depreciation expense Gain on sale of plant assets Changes in current operating assets and liabilities Increase in accounts receivable Decrease in inventory Decrease in prepaid expenses Decrease in accounts payable Decrease in wages payable Decrease in income taxes payable 135.510 Cash flows from investing activities Cash received from sale of equipment Cash paid for equipment Cash flows from financing activities $ 135,510 Net increase (decrease) in cash Cash balance at prior year-end Cash balance at current year-end $ 135 510

Answer 1

Solution

IKIBAN INC.
Statement of Cash Flows
For the Year ended June 30th 2019
A. Cash Flows from Operating Activity
Net Income		$    135,510.00
Adjustments to reconcile net income to net cash flows from Operating Activities
Income statement items not affecting cash
Depreciation expense	$           76,600.00
Gain on sale of Equipment	$           (3,800.00)
Cahnges In Current Operating Assets Liabilities
Increase in Accounts Receivable	$        (23,000.00)
Decrease in Inventory	$           31,700.00
Decrease in Prepaid Expenses	$             2,800.00
Decrease in Accounts Payable	$        (14,000.00)
Decrease in Wages Payable	$        (10,800.00)
Decrease in Income taxes payable	$           (2,200.00)
		$      57,300.00
Net cash flow from Operating activities		$    192,810.00
B. Cash flows from Investing Activities
Cash paid for Equipment	$        (75,600.00)
Cash received from Sale Of Equipment	$           11,800.00
Net Cash Used in Investing activities		$    (63,800.00)
C. Cash Flows from Financing activities
Cash paid to retire notes	$        (30,000.00)
Cash received from stock issuance	$           78,000.00
Cash paid for Dividends	$      (142,310.00)
Cash flows from Financing activities		$    (94,310.00)
Net Increase (Decrease) in Cash [A+B+C]		$      34,700.00
Cash balance at prior Year-end		$      62,000.00
Cash balance at Current Year-end		$      96,700.00

Working

Accumulated depreciation on equipment sold
Accumulated Depreciation beginning balance	$       18,000.00
Add: Depreciation of current year	$       76,600.00
Subtotal	$       94,600.00
Ending balance of Accumulated depreciation	$       36,000.00
Depreciation on asset sold	$       58,600.00

.

Cash received on sale of Equipment
Cost of equipment sold	$       66,600.00
Less: Accumulated depreciation	$       58,600.00
Book value of asset sold	$         8,000.00
Profit on sale	$         3,800.00
Cash received on sale of equipment	$       11,800.00

.

Calculation of dividend paid
Beginning balance of retained earnings	$       29,500.00
Add: Net income	$    135,510.00
	$    165,010.00
Less: Ending balance of Retained earnings	$       22,700.00
Dividends paid in cash	$    142,310.00