Question

The following financial statements and additional information are reported.

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.

Answer 1