Question

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The following financial statements and additional information are reported.

IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016
	2017				2016
Assets
Cash	$	94,300			$	66,000
Accounts receivable, net		98,000				73,000
Inventory		85,800				119,500
Prepaid expenses		6,600				9,800
Total current assets		284,700				268,300
Equipment		146,000				137,000
Accum. depreciation—Equipment		(38,000	)			(20,000	)
Total assets	$	392,700			$	385,300
Liabilities and Equity
Accounts payable	$	47,000			$	63,000
Wages payable		8,200				19,400
Income taxes payable		5,600				8,200
Total current liabilities		60,800				90,600
Notes payable (long term)		52,000				82,000
Total liabilities		112,800				172,600
Equity
Common stock, $5 par value		264,000				182,000
Retained earnings		15,900				30,700
Total liabilities and equity	$	392,700			$	385,300

  

IKIBAN INC. Income Statement For Year Ended June 30, 2017
Sales				$	788,000
Cost of goods sold					433,000
Gross profit					355,000
Operating expenses
Depreciation expense	$	80,600
Other expenses		89,000
Total operating expenses					169,600
					185,400
Other gains (losses)
Gain on sale of equipment					4,200
Income before taxes					189,600
Income taxes expense					46,090
Net income				$	143,510

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 $79,600 cash.
4. Received cash for the sale of equipment that had cost $70,600, yielding a $4,200 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.

rev: 12_05_2017_QC_CS-111198

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

IKIBAN, INC.
Statement of Cash Flows (Direct Method)
For Year Ended June 30, 2017
Cash flows from operating activities
Cash received from customers	763,000		=788000+73000-98000
Cash paid for inventory	-415,300		=433000+85800-119500+63000-47000
Cash paid for operating expenses	-97,000		=89000+19400-8200+6600-9800
Cash paid for income taxes	-48,690		=46090+8200-5600
Net cash provided by operating activities		202,010
Cash flows from investing activities
Cash received from sale of equipment	12,200
Cash paid for equipment	-79,600
Net cash used in investing activities		-67,400
Cash flows from financing activities
Cash received from stock issuance	82,000
Cash paid to retire notes	-30,000
Cash paid for dividends	-158,310		=30700+143510-15900
Net cash used in financing activities		-106,310
Net increase (decrease) in cash		28,300
Cash balance at prior year-end		66,000
Cash balance at current year-end		94,300
Workings:
Cash received from sale of equipment:
Cost of Equipment sold	70600
Less: Accumulated depreciation on Equipment	62600		=20000+80600-38000
Book value of Equipment	8000
Add: Gain on sale of Equipment	4200
Cash received from sale of equipment	12200
Adjustment workings:
Cash received from customers = Sales revenue+Change in Accounts Receivable
Cash paid for inventory = Cost of goods sold+Change in inventory+Change in Accounts Payable
Cash paid for operating expenses = Operating expenses+Change in wages payable+Change in prepaid expenses
Cash paid for income taxes = Income tax expense+Change in Income taxes payable
Cash paid for dividends = Net income+Change in retained earnings