Question

IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016
	2017				2016
Assets
Cash	$	92,500			$	69,000
Accounts receivable, net		102,500				76,000
Inventory		88,800				124,000
Prepaid expenses		6,900				10,400
Total current assets		290,700				279,400
Equipment		149,000				140,000
Accum. depreciation—Equipment		(39,500	)			(21,500	)
Total assets	$	400,200			$	397,900
Liabilities and Equity
Accounts payable	$	50,000			$	67,500
Wages payable		8,500				20,000
Income taxes payable		5,900				8,800
Total current liabilities		64,400				96,300
Notes payable (long term)		55,000				85,000
Total liabilities		119,400				181,300
Equity
Common stock, $5 par value		270,000				185,000
Retained earnings		10,800				31,600
Total liabilities and equity	$	400,200			$	397,900

  

IKIBAN INC. Income Statement For Year Ended June 30, 2017
Sales				$	803,000
Cost of goods sold					436,000
Gross profit					367,000
Operating expenses
Depreciation expense	$	83,600
Other expenses		92,000
Total operating expenses					175,600
					191,400
Other gains (losses)
Gain on sale of equipment					4,500
Income before taxes					195,900
Income taxes expense					46,390
Net income				$	149,510

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 $82,600 cash.

Received cash for the sale of equipment that had cost $73,600, yielding a $4,500 gain.

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

All purchases and sales of inventory are on credit.

Compute the company's cash flow on total assets ratio for its fiscal year 2017. Please give the formula as well.

Answer 1

Answer

Cash Flow Statement
	Detail	Net
Cash Flow from Operating Activities
Net Income before taxes		195,900
Add: Non cash and Non operating Expenses
Depreciation	83,600
Less: Non cash and Non Operating Incomes
Gain on sale of Equipment	(4,500)
Working Capital Changes
Increase in Accounts Receivable	(26,500)
Decrease in Inventory	35,200
Decrease in Prepaid expenses	3,500
Decrease in Accounts Payable	(17,500)
Decrease in Wages payable	(11,500)
Income Taxes Paid	(49,290)
Cash Flow from Operating Activities (A)		208,910
Cash Flow from Investing Activities
Sale of Equipment	12,500
Purchases of Equipment	(82,600)
Cash Used in Investing Activities (B)		(70,100)
Cash Flow from Financing Activities
Payment of note	(30,000)
Dividend Paid [149,510 + 20,800 (Decrease in Retained Earnings]	(170,310)
Issue of Common Shares	85,000
Cash used in Financing Activities ( C)		(115,310)
Decrease in Cash (A+B+C)		23,500
Opening Cash		69,000
Closing Cash		92,500

Euipment
Beg. Bal	140,000	Bank (Bal.)	12,500
		Acc. Depreciation	65,600
P&l (Profit on sale)	4,500
Bank (Purchases)	82,600
		Closing Bal.	149,000
Total	227,100	Total	227,100
Acc. Depreciation - Equipment
		Beg. Bal	21,500
Equipment (Sold) (Bal.)	65,600	P&L (Current Year)	83,600
Closing Bal.	39,500
Total	105,100	Total	105,100
Income Tax payable
		Beg. Bal	8,800
Bank (Paid)	49,290	P&L (Current Year)	46,390
Closing Bal.	5,900
Total	55,190	Total	55,190

Cash flow to Total Assets Ratio = (Cash flow from Operating Activities / Average Assets) * 100

Cash flow from Operating Activities = $208,910

Average Assets = (Opening Total Assets + Closing Opening Assets) / 2

= (397,900 + 400,200) / 2

Average Assets = $399,050

Cash flow to Total Assets Ratio = ($208,910 / $399,050) * 100

Cash flow to Total Assets Ratio = 52.35%