Question

The following financial statements and additional information are reported. IKIBAN INC. Comparative Balance Sheets June 30, 2019 and 2018 2019 2018 Assets Cash $ 96,700 $ 62,000 Accounts receivable, net 92,000 69,000 Inventory 81,800 113,500 Prepaid expenses 6,200 9,000 Total current assets 276,700 253,500 Equipment 142,000 133,000 Accum. depreciation—Equipment (36,000 ) (18,000 ) Total assets $ 382,700 $ 368,500 Liabilities and Equity Accounts payable $ 43,000 $ 57,000 Wages payable 7,800 18,600 Income taxes payable 5,200 7,400 Total current liabilities 56,000 83,000 Notes payable (long term) 48,000 78,000 Total liabilities 104,000 161,000 Equity Common stock, $5 par value 256,000 178,000 Retained earnings 22,700 29,500 Total liabilities and equity $ 382,700 $ 368,500 IKIBAN INC. Income Statement For Year Ended June 30, 2019 Sales $ 768,000 Cost of goods sold 429,000 Gross profit 339,000 Operating expenses Depreciation expense $ 76,600 Other expenses 85,000 Total operating expenses 161,600 177,400 Other gains (losses) Gain on sale of equipment 3,800 Income before taxes 181,200 Income taxes expense 45,690 Net income $ 135,510 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 $75,600 cash. Received cash for the sale of equipment that had cost $66,600, yielding a $3,800 gain. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. All purchases and sales of inventory are on credit.

(2) Compute the company’s cash flow on total assets ratio for its fiscal year 2019.

Answer 1

2
Cash Flow on Total Assets Ratio
Choose Numerator: /	Choose Denominator: =	Cash Flow on Total Assets Ratio
Operating cash flows /	Average total assets =	Cash Flow on Total Assets Ratio
192810 /	375600 =	51.3%
Workings:
Cash flows from operating activities
Net income	$135,510
Adjustments to reconcile net income to net cash provided by operating activities
Income statement items not affecting cash
Depreciation expense	76,600
Gain on sale of plant assets	-3,800
Changes in current operating assets and liabilities
Increase in accounts receivable	-23,000
Decrease in inventory	31,700
Decrease in prepaid expenses	2,800
Decrease in accounts payable	-14,000
Decrease in wages payable	-10,800
Decrease in income taxes payable	-2200
Net cash provided by operating activities		$192,810
Average total assets	375600	=(382700+368500)/2