Question

IKIBAN INC Comparative Balance Sheets June 30, 2017 and 2016 2017 2016 Assets $ 94,900 96,500 84,800 6,500 282,700 Cash $65,000 Accounts receivable, net Inventory Prepaid expenses 72,000 118,000 9,600 264,600 136,000 Total current assets Equipment Accum. depreciation-Equipment 145,000 (37,500) (19,500) $390,200 $381,100 Total assets Liabilities and Equity Accounts payable Wages payable Income taxes payable $ 46,000 8,100 61,500 19,200 8,000 88,700 81,000 5,500 Total current liabilities 59,600 Notes payable (long term) 51,000 110,600 Total liabilities 169,700 Equity Common stock, $5 par value Retained earnings 262,000 17,600 181,000 30,400 Total liabilities and equity $390,200 $381,100 IKIBAN INC. Income Statement For Year Ended June 30, 2017 $783,000 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense 432,000 351,000 $79,600 Other expenses 88,000 Total operating expenses 167,600 183,400 Other gains (losses) Gain on sale of equipment 4,100 Income before taxes 187,500 Income taxes expense 45,990 $141,510 Net income 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 $78,600 cash. d. Received cash for the sale of equipment that had cost $69,600, yielding a $4,100o gain Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. f. All purchases and sales of inventory are on credit. e. Statement of Cash Flows (Indirect Method) For Year Ended June 30, 2017 Cash flows from operating activities Net income 141,510 Adjustments to reconcile net income to net cash provided by operating activities Income statement items not affecting cash Depreciation expense 79,600 Gain on sale of plant assets (4,100) Changes in current operating assets and liabilities Increase in accounts receivable (24,500) Decrease in inventory 33,200 Decrease in prepaid expenses 3,100 Decrease in accounts payable (15,500) Decrease in wages payable (11,100) Decrease in income taxes payable (2,500) Net cash provided by operating activities 199,710 Cash flows from investing activities Cash received from sale of equipment Cash paid for equipment (78,600) Increase in accounts payable Net cash used in investing activities (78,600) Cash flows from financing activities Cash received from stock issuance 81,000 (30,000) Cash paid to retire notes Cash paid for dividends Net cash used in financing activities 51,000 Net increase (decrease) in cash 172,110 Cash balance at prior year-end Cash balance at current year-end 172.110 Exercise 12-11 Part 2 (2) Compute the company's cash flow on total assets ratio for its fiscal year 2017. Cash Flow on Total Assets Ratio Choose Denominator: =Cash Flow on Total Assets Ratio Choose Numerator: Cash flow on total assets ratio Using the direct method, prepare the statement of cash flows for the year ended June 30, 2017. (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 0 Cash flows from investing activities Cash flows from financing activities Net increase (decrease) in cash 0 Cash balance at prior year-end Cash balance at current year-end 0

Answer 1

A B C Statement of Cash Flows (Indirect Method) 2 For the Year Ended June 30,2017 4 Cash flows from operating activities 5 Net income 1,41,510 Adjustments to reconcile net income to net cash provided by operating activities 6 Depreciation expense $ 7 79,600 $ Gain on sale of plant assets 8 4,100 9 Changes in current operating assets and liabilities 10 Increase in accounts receivable -24,500 $ $ 11 Decrease in inventory Decrease in prepaid expenses Decrease in accounts payable Decrease in wages payable Decrease in income taxes payable 12 33,200 13 3,100 14 -15,500 $ 15 -11,100 $ 16 -2,500 17 Net cash provided by operating activities 19 Cash flows from investing activities Cash received from sale of equipment Cash paid for equipment 18 1,99,710 12,100 20 $ 21 -78,600 22 $ Net cash used in investing activities 24 Cash flows from financing activities 23 -66,500 $ 81,000 $ -30,000 $-1,54,310 Cash received from stock issuance 25 Cash paid to retire notes Cash paid for dividends 26 27 28 $ -1,03,310 Net cash used in financing activities 30 Net increase (decrease) in cash 31 Cash balance at prior year-end 32 Cash balance at current year-end 29 29,900 $ 65,000 94,900 つつ

C A D Cash Flow on Total Assets Ratio 1 Operating Cash Flows/ Average Total Assets 2 Cash Flow on Total Assets Ratio $ 1,99,710 /(($3,90,200 $3,81,100)/2) 1,99,710 /$3,85,650 4 0.52

A B C IKIBAN Inc., 1 Statement of Cash Flows (Direct Method) For the Year Ended June 30,2017 2 3 Cash flows from Operating Activities 4 Cash received from customers 7,58,500 -4,14,300 Cash paid for merchandise Cash paid for operating expenses Cash paid for income taxes Net cash provided by operating activities 6 7 96,000 -48,490 9 1,99,710 10 11 Cash flows from investing activities $ Cash received from sale of equipment $ 12,100 12 Cash paid for equipment 13 -78,600 $ Net cash used in investing activities 14 -66,500 15 16 Cash flows from financing activities $ Cash received from stock issuance 17 81,000 Cash paid to retire notes Cash paid for dividends Net cash used in financing activities 18 -30,000 -1,54,310 19 20 -1,03,310 21 22 Net increase in cash 23 Cash balance at prior year-end 29,900 65,000 24 Cash balance at current year-end 94,900 25