In: Accounting
The following financial statements and additional information
are reported.
IKIBAN INC. Comparative Balance Sheets June 30, 2019 and 2018 |
||||||||
2019 | 2018 | |||||||
Assets | ||||||||
Cash | $ | 99,700 | $ | 57,000 | ||||
Accounts receivable, net | 84,500 | 64,000 | ||||||
Inventory | 76,800 | 106,000 | ||||||
Prepaid expenses | 5,700 | 8,000 | ||||||
Total current assets | 266,700 | 235,000 | ||||||
Equipment | 137,000 | 128,000 | ||||||
Accum. depreciation—Equipment | (33,500 | ) | (15,500 | ) | ||||
Total assets | $ | 370,200 | $ | 347,500 | ||||
Liabilities and Equity | ||||||||
Accounts payable | $ | 38,000 | $ | 49,500 | ||||
Wages payable | 7,300 | 17,600 | ||||||
Income taxes payable | 4,700 | 6,400 | ||||||
Total current liabilities | 50,000 | 73,500 | ||||||
Notes payable (long term) | 43,000 | 73,000 | ||||||
Total liabilities | 93,000 | 146,500 | ||||||
Equity | ||||||||
Common stock, $5 par value | 246,000 | 173,000 | ||||||
Retained earnings | 31,200 | 28,000 | ||||||
Total liabilities and equity | $ | 370,200 | $ | 347,500 | ||||
IKIBAN INC. Income Statement For Year Ended June 30, 2019 |
||||||
Sales | $ | 743,000 | ||||
Cost of goods sold | 424,000 | |||||
Gross profit | 319,000 | |||||
Operating expenses | ||||||
Depreciation expense | $ | 71,600 | ||||
Other expenses | 80,000 | |||||
Total operating expenses | 151,600 | |||||
167,400 | ||||||
Other gains (losses) | ||||||
Gain on sale of equipment | 3,300 | |||||
Income before taxes | 170,700 | |||||
Income taxes expense | 45,190 | |||||
Net income | $ | 125,510 | ||||
Additional Information
Required:
(1) Prepare a statement of cash flows using the indirect method for the year ended June 30, 2019.
ANSWER:
IKIBAN, INC. | ||
Statement of Cash Flows (Indirect Method) | ||
For Year Ended June 30,2019 | ||
Cash flows from operating activities: | ||
Net income | $125,510 | |
Adjustments to reconcile net income to net cash provided by Operating activities | ||
Income statement items not affecting cash | ||
Depreciation expense | $71,600 | |
Gain on sale of equipment | ($3,300) | |
Changes in current operating assets and liabilities: | ||
Increase in accounts receivable | ($20,500) | |
Decrease in inventory | $29,200 | |
Decrease in prepaid expenses | $2,300 | |
Decrease in Accounts payable | ($11,500) | |
Decrease in wages payable | ($10,300) | |
Decrease in income taxes payable | ($1,700) | $55,800 |
Net cash provided (used) by operating activities (i) | $181,310 | |
Cash flows from investing activities: | ||
Purchase of equipment | ($70,600) | |
Sale of equipment | $11,300 | |
Net cash provided (used) by investing activities (ii) | ($59,300) | |
Cash flows from financing activities: | ||
Retiremet of notes payable | ($30,000) | |
Payment of cash dividends | ($122,310) | |
Issuance of common stock | $73,000 | |
Net cash provided (used) by financing activities (iii) | ($79,310) | |
Net increase (decrease) in cash (i)+(ii)+(iii) | $42,700 | |
Cash balance, Dec 31,2018 | $57,000 | |
Cash balance, Dec 31,2019 | $99,700 |
Calculations:
i.Cash received on sale of equipment:
Accum. depreciation—Equipment, Beginning | $15,500 |
Depreciation expense | $71,600 |
Accum. depreciation—Equipment, Ending | ($33,500) |
Accum. Depreciation on Sold equipment | $53,600 |
Cost of sold equipment | $61,600 |
Accum. Depreciation on Sold equipment | ($53,600) |
Book value of sold equipment | $8,000 |
Add: Gain on sale | $3,300 |
Cash received on sale of equipment | $11,300 |
ii.Dividends paid:
Retained earnings, beginning | $28,000 |
Net income | $125,510 |
Retained earnings, ending | ($31,200) |
Dividends paid | $122,310 |