Question

The following financial statements and additional information are reported.

IKIBAN INC. Comparative Balance Sheets June 30, 2019 and 2018
	2019				2018
Assets
Cash	$	77,900			$	60,000
Accounts receivable, net		89,000				67,000
Inventory		79,800				110,500
Prepaid expenses		6,000				8,600
Total current assets		252,700				246,100
Equipment		140,000				131,000
Accum. depreciation—Equipment		(35,000	)			(17,000	)
Total assets	$	357,700			$	360,100
Liabilities and Equity
Accounts payable	$	41,000			$	54,000
Wages payable		7,600				18,200
Income taxes payable		5,000				7,000
Total current liabilities		53,600				79,200
Notes payable (long term)		33,200				76,000
Total liabilities		86,800				155,200
Equity
Common stock, $5 par value		252,000				176,000
Retained earnings		18,900				28,900
Total liabilities and equity	$	357,700			$	360,100

IKIBAN INC. Income Statement For Year Ended June 30, 2019
Sales				$	758,000
Cost of goods sold					427,000
Gross profit					331,000
Operating expenses
Depreciation expense	$	74,600
Other expenses		83,000
Total operating expenses					157,600
					173,400
Other gains (losses)
Gain on sale of equipment					3,600
Income before taxes					177,000
Income taxes expense					45,490
Net income				$	131,510

Additional Information

1. A $42,800 note payable is retired at its $42,800 carrying (book) value in exchange for cash.
2. The only changes affecting retained earnings are net income and cash dividends paid.
3. New equipment is acquired for $73,600 cash.
4. Received cash for the sale of equipment that had cost $64,600, yielding a $3,600 gain.
5. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
6. All purchases and sales of inventory are on credit.

Using the direct method, prepare the statement of cash flows for the year ended June 30, 2019. (Amounts to be deducted should be indicated with a minus sign.)

IKIBAN, INC. Statement of Cash Flows (Direct Method) For Year Ended June 30, 2017 Cash flows from operating activities Cash received from customers Cash paid for operating expenses Cash paid for income taxes Cash paid for inventory Net cash provided by operating activities Cash flows from investing activities Cash received from sale of equipment Cash paid for equipment Net cash used in investing activities Cash flows from financing activities Cash paid for dividends Cash paid to retire notes Cash received from stock issuance Net cash used in financing activities Net increase (decrease) in cash Cash balance at prior year-end Cash balance at current year-end

Answer 1

Cash flows from operating activities
cash from customers				736,000
less:operating expense
cash paid to suppliers				-409,300
cash paid for operating expense				-91,000
cash paid for income tax				-47,490
net cash flow from operating activities					188,210
Cash flows from investing activities
cash from sale of Equipment				11,600
cash paid for purchase of Equipment				-73600
net cash used by investing activities					-62,000
Cash flow from financing activities
cash paid for notes payable				-42,800
cash paid for dividends				-141,510
cash from stock issue				76000
net cash used by financing activities					-108,310
net increase in cash					17,900
cash at the beginning of the year					60000
cash at year end					77,900

Working notes:
cash received from sale of equipment
cost of Equipment					64,600
Accumulated dep					56,600
Book value					8,000
Add:Gain on sale					3,600
cash received from sale of equipment					11,600
Accumulated depreciation on sold Equipment
opening bal					17,000
add depreciation expense for year					74,600
total					91,600
less closing balance					35,000
Accumulated depreciation on sold Equipment					56,600
Dividend paid
opening retained earnings					28,900
Add : net income					131,510
					160,410
less closing retained earnings					-18900
Dividends paid					141,510

Cash from customers
Sales				758,000
less: increase in accounts receivable				-22000
Cash from customers				736,000
Cash paid to suppliers
cost of goods sold				427,000
decrease In inventory				-30700
Decrease in accounts payable				13000
cash paid to suppliers				409,300
Cash paid for operating expense
expense excluding dep				83,000
less decrease in prepaid expense				-2600
add decrease in wages payable				10600
Cash paid for operating expense				91,000
cash paid for income tax
income tax expense				45,490
Add decrease in income taxes payable				2000
cash paid for income tax				47,490