Question

The following financial statements and additional information are reported.

IKIBAN INC. Comparative Balance Sheets June 30, 2015 and 2014
	2015				2014
Assets
Cash	$	114,400			$	66,300
Accounts receivable, net		70,000				51,900
Inventory		65,900				96,600
Prepaid expenses		4,700				6,100
Total current assets		255,000				220,900
Equipment		124,700				114,000
Accum. depreciation—Equipment		(28,800	)			(10,400	)
Total assets	$	350,900			$	324,500
Liabilities and Equity
Accounts payable	$	26,300			$	32,700
Wages payable		7,900				16,300
Income taxes payable		2,700				4,400
Total current liabilities		36,900				53,400
Notes payable (long term)		55,000				75,000
Total liabilities		91,900				128,400
Equity
Common stock, $5 par value		234,000				188,000
Retained earnings		25,000				8,100
Total liabilities and equity	$	350,900			$	324,500

     

IKIBAN INC. Income Statement For Year Ended June 30, 2015
Sales				$	670,000
Cost of goods sold					408,000
Gross profit					262,000
Operating expenses
Depreciation expense	$	58,300
Other expenses		66,600
Total operating expenses					124,900
					137,100
Other gains (losses)
Gain on sale of equipment					2,700
Income before taxes					139,800
Income taxes expense					55,920
Net income				$	83,880

     

Additional Information

a.	A $20,000 note payable is retired at its $20,000 carrying (book) value in exchange for cash.
b.	The only changes affecting retained earnings are net income and cash dividends paid.
c.	New equipment is acquired for $59,900 cash.
d.	Received cash for the sale of equipment that had cost $49,200, yielding a $2,700 gain.
e.	Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
f.	All purchases and sales of inventory are on credit.

rev: 03_09_2016_QC_CS-44693

4.

value:
6.00 points

Required information

Required:
(1)	Prepare a statement of cash flows for the year ended June 30, 2015, using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

IKIBAN INC
Statement of Cash Flows
For the Year Ended June 30, 2015
Cash flows from operating activities
Net Income		$    83,880
Adjustments to reconcile net income to :
Depreciation expense	$   58,300
Gain on sale of equipment	$   (2,700)
Increase in accounts receivable	$ (18,100)		51900-70000
Decrease in inventory	$   30,700		96600-65900
Decrease in prepaid expenses	$      1,400		6100-4700
Decrease in accounts payable	$   (6,400)		26300-32700
Decrease in wages payable	$   (8,400)		7900-16300
Decrease in income tax payable	$   (1,700)		2700-4400
		$    53,100
Net cash provided by operating activities		$ 136,980
Cash flows from investing activities
Cash received from sale of equipment	$   12,000		49200-(10400+58300-28800)+2700
Cash paid for sale of equipment	$ (59,900)
Net cash used by investing activities		$ (47,900)
Cash flows from financing activities
Cash paid as dividend	$ (66,980)		25000-8100-83880
Cash paid for retire notes	$ (20,000)
Cash received from issuance of common stock	$   46,000		234000-188000
Net cash used by financing activities		$ (40,980)
Net Increase in cash and cash equivalents		$    48,100
Cash and cash equivalents at beginning of period		$    66,300
Cash and cash equivalents at end of period		$ 114,400