Question

Required information Exercise 12-11 Indirect: Preparing statement of cash flows LO P1, P2, P3, A1

The following financial statements and additional information are reported. IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016 2017 2016 Assets Cash $ 87,500 $ 44,000 Accounts receivable, net 65,000 51,000 Inventory 63,800 86,500 Prepaid expenses 4,400 5,400 Total current assets 220,700 186,900 Equipment 124,000 115,000 Accum. depreciation—Equipment (27,000 ) (9,000 ) Total assets $ 317,700 $ 292,900 Liabilities and Equity Accounts payable $ 25,000 $ 30,000 Wages payable 6,000 15,000 Income taxes payable 3,400 3,800 Total current liabilities 34,400 48,800 Notes payable (long term) 30,000 60,000 Total liabilities 64,400 108,800 Equity Common stock, $5 par value 220,000 160,000 Retained earnings 33,300 24,100 Total liabilities and equity $ 317,700 $ 292,900 IKIBAN INC. Income Statement For Year Ended June 30, 2017 Sales $ 678,000 Cost of goods sold 411,000 Gross profit 267,000 Operating expenses Depreciation expense $ 58,600 Other expenses 67,000 Total operating expenses 125,600 141,400 Other gains (losses) Gain on sale of equipment 2,000 Income before taxes 143,400 Income taxes expense 43,890 Net income $ 99,510 Additional Information A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash. The only changes affecting retained earnings are net income and cash dividends paid. New equipment is acquired for $57,600 cash. Received cash for the sale of equipment that had cost $48,600, yielding a $2,000 gain. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. All purchases and sales of inventory are on credit. Exercise 12-11 Part 1 Required: (1) Prepare a statement of cash flows for the year ended June 30, 2017, using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

IKIBAN, INC.
Statement of Cash Flows (Indirect Method)
For Year Ended June 30, 2017
Cash flows from operating activities
Net income	$99,510
Adjustments to reconcile net income to net cash provided by operating activities
Income statement items not affecting cash
Depreciation expense	58,600
Gain on sale of plant assets	-2,000
Changes in current operating assets and liabilities
Increase in accounts receivable	-14,000
Decrease in inventory	22,700
Decrease in prepaid expenses	1,000
Decrease in accounts payable	-5,000
Decrease in wages payable	-9,000
Decrease in income taxes payable	-400
Net cash provided by operating activities		$151,410
Cash flows from investing activities
Cash received from sale of equipment	10,000
Cash paid for equipment	-57,600
Net cash used in investing activities		-47600
Cash flows from financing activities
Cash received from stock issuance	60,000
Cash paid to retire notes	-30,000
Cash paid for dividends	-90,310
Net cash used in financing activities		-60,310
Net increase (decrease) in cash		$43,500
Cash balance at prior year-end		44,000
Cash balance at current year-end		$87,500