Question

In: Accounting

The following financial statements and additional information are reported. IKIBAN INC. Comparative Balance Sheets June 30,...

The following financial statements and additional information are reported.

IKIBAN INC.
Comparative Balance Sheets
June 30, 2017 and 2016
2017 2016
Assets
Cash $ 103,900 $ 50,000
Accounts receivable, net 74,000 57,000
Inventory 69,800 95,500
Prepaid expenses 5,000 6,600
Total current assets 252,700 209,100
Equipment 130,000 121,000
Accum. depreciation—Equipment (30,000 ) (12,000 )
Total assets $ 352,700 $ 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 43,100 25,900
Total liabilities and equity $ 352,700 $ 318,100

  

IKIBAN INC.
Income Statement
For Year Ended June 30, 2017
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

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 $63,600 cash.

Received cash for the sale of equipment that had cost $54,600, yielding a $2,600 gain.

Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.

All purchases and sales of inventory are on credit.

(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.)

(2) Compute the company's cash flow on total assets ratio for its fiscal year 2017.

(3) 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.)

Solutions

Expert Solution

Cash flow indirect method
Cash flow from operating activities
Net income 111510
Adjustments to reconcile the net income
Depreciation and amortization expense 64600
Gain on sale of equipment -2600
Changes in current asset 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 53700
Cash flow from operating activities 165210
Cash flow from Investing activities
Equipment sold 10600
Equipment purchased -63600
Cash flow from Investing activities -53000
Cash flow from Financing activities
Paid in capital in excess
Common stock 66000
Dividend -94310
Long term notes payable -30000
Cash flow from Financing activities -58310
Net Cash and cash equivalent 53900
Add Beginning cash and cash equivalent 50000
Ending cash and cash equivalent 103900

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