Question

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.)

Answer 1

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