Question

The following financial statements and additional information are reported.

IKIBAN INC. Comparative Balance Sheets June 30, 2018 and 2017
	2018				2017
Assets
Cash	$	83,900			$	50,000
Accounts receivable, net		74,000				57,000
Inventory		69,800				95,500
Prepaid expenses		5,000				6,600
Total current assets		232,700				209,100
Equipment		130,000				121,000
Accum. depreciation—Equipment		(30,000	)			(12,000	)
Total assets	$	332,700			$	318,100
Liabilities and Equity
Accounts payable	$	31,000			$	39,000
Wages payable		6,600				16,200
Income taxes payable		4,000				5,000
Total current liabilities		41,600				60,200
Notes payable (long term)		36,000				66,000
Total liabilities		77,600				126,200
Equity
Common stock, $5 par value		232,000				166,000
Retained earnings		23,100				25,900
Total liabilities and equity	$	332,700			$	318,100

IKIBAN INC. Income Statement For Year Ended June 30, 2018
Sales				$	708,000
Cost of goods sold					417,000
Gross profit					291,000
Operating expenses
Depreciation expense	$	64,600
Other expenses		73,000
Total operating expenses					137,600
					153,400
Other gains (losses)
Gain on sale of equipment					2,600
Income before taxes					156,000
Income taxes expense					44,490
Net income				$	111,510

Additional Information

1. A $30,000 note payable is retired at its $30,000 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 $63,600 cash.
4. Received cash for the sale of equipment that had cost $54,600, yielding a $2,600 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.

Required:

(1) Prepare a statement of cash flows for the year ended June 30, 2018, using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Statement of cash Flows
Cash flow from operating activities
Net income for the year	111,510
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation expense	64,600
Gain on sale of Equipment	-2,600
Changes in current operating assets and
liabilities
increase in accounts receivable	-17000
Decrease in inventory	25700
Decrease in prepaid expense	1600
Decrease in accounts payable	-8000
Decrease in wages payable	-9600
Decrease in income taxes payable	-1000
net cash provided by operating activities		165,210
Cash flow from investing activities
purchase of Equipment	-63,600
Cash received from sale of Equipment	10,600
net cash used by investing activities		-53,000
Cash flow from financing activities
cash paid for notes payable	-30,000
Cash from stock issue	66000
cash dividend	-114,310
Net cash used by investing activities		-78310
net increase in cash		33,900
Cash at the beginning of the year		50,000
cash at year end		83,900
Working notes:
cash received from sale of equipment
cost of Equipment	54,600
Accumulated dep	46,600
Book value	8,000
Add:Gain on sale	2,600
cash received from sale of equipment	10,600
Accumulated depreciation on sold Equipment
opening bal	12,000
add depreciation expense for year	64,600
total	76,600
less closing balance	30,000
Accumulated depreciation on sold Equipment	46,600
Dividend paid
opening retained earnings	25,900
Add : net income	111,510
	137,410
less closing retained earnings	-23100
Dividends paid	114,310