Question

The following financial statements and additional information are reported. IKIBAN INC. Comparative Balance Sheets June 30, 2015 and 2014 2015 2014 Assets Cash $ 108,800 $ 68,700 Accounts receivable, net 69,300 51,800 Inventory 65,900 96,400 Prepaid expenses 5,900 4,500 Total current assets $ 249,900 $ 221,400 Equipment 123,700 112,000 Accum. depreciation—Equipment (28,600 ) (10,100 ) Total assets $ 345,000 $ 323,300 Liabilities and Equity Accounts payable $ 26,400 $ 32,000 Wages payable 7,500 17,000 Income taxes payable 2,800 4,300 Total current liabilities $ 36,700 $ 53,300 Notes payable (long term) 51,000 74,000 Total liabilities $ 87,700 $ 127,300 Equity Common stock, $5 par value 232,000 188,000 Retained earnings 25,300 8,000 Total liabilities and equity $ 345,000 $ 323,300 IKIBAN INC. Income Statement For Year Ended June 30, 2015 Sales $ 670,000 Cost of goods sold 406,000 Gross profit 264,000 Operating expenses Depreciation expense $ 58,000 Other expenses 66,100 Total operating expenses 124,100 139,900 Other gains (losses) Gain on sale of equipment 2,500 Income before taxes 142,400 Income taxes expense 56,960 Net income $ 85,440 Additional Information a. A $23,000 note payable is retired at its $23,000 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 $60,400 cash. d. Received cash for the sale of equipment that had cost $48,700, yielding a $2,500 gain. e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. f. All purchases and sales of merchandise inventory are on credit. Using the direct method, prepare the statement of cash flows for the year ended June 30, 2015. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Solution:

Computation of cash received from customers
Particulars	Amount
Beginning accounts receivables	$51,800.00
Add: Sales	$670,000.00
Less: Ending accounts receivables	$69,300.00
Cash received from customers	$652,500.00

Computation of cash paid for inventory
Cost of Goods Sold	$406,000.00
Add: Ending inventory	$65,900.00
Less: Beginning inventory	$96,400.00
Purchases made during the year	$375,500.00
Add: Opening accounts payable	$32,000.00
Less: Ending accounts payable	$26,400.00
Cash paid for inventory	$381,100.00

Computation of cash paid for Other Expenses
Particulars	Amount
Other expenses	$66,100.00
Add: Ending Prepaid expense	$5,900.00
Less: Beginning prepaid expense	$4,500.00
Add: Opening Wages Payable	$17,000.00
Less: Ending wages Payable	$7,500.00
Cash paid for Other Expenses	$77,000.00

Computation of cash paid for Income Tax
Particulars	Amount
Income Tax Expense	$56,960.00
Add: Opening Income tax Payable	$4,300.00
Less: Ending Income Tax Payable	$2,800.00
Cash paid for Income Tax	$58,460.00

IKIBAN INC
Statement of Cash Flows
For Year Ended June 30, 2015
Particulars	Details	Amount
Cash Flows from operating activities:
Cash received from customers	$652,500.00
Cash paid for inventory	-$381,100.00
Cash paid for other expenses	-$77,000.00
Cash Paid for income taxes	-$58,460.00
Net Cash provided by operating activities		$135,940.00
Cash flow from investing activities:
Purchase of Equipment	-$60,400.00
Sale of equipment ($48,700 - $39,500 + $2,500)	$11,700.00
Net Cash used in investing activities		-$48,700.00
Cash flow from financing activities:
Repayment of note	-$23,000.00
Cash paid for dividends ($8,000 + $85,440 - $25,300)	-$68,140.00
Cash received from issuing stock ($232,000 - $188,000)	$44,000.00
Net Cash used in financing activities		-$47,140.00
Net Increase (Decrease) in Cash		$40,100.00
Cash balance at beginning of year		$68,700.00
Cash balance at end of year		$108,800.00