Question

The following financial statements and additional information are reported. IKIBAN INC. Comparative Balance Sheets June 30, 2015 and 2014 2015 2014 Assets Cash $ 115,400 $ 62,700 Accounts receivable, net 69,400 51,300 Inventory 66,100 96,700 Prepaid expenses 4,800 5,600 Total current assets 255,700 216,300 Equipment 127,500 117,000 Accum. depreciation—Equipment (28,200 ) (10,100 ) Total assets $ 355,000 $ 323,200 Liabilities and Equity Accounts payable $ 26,200 $ 32,500 Wages payable 7,900 16,300 Income taxes payable 2,600 3,900 Total current liabilities 36,700 52,700 Notes payable (long term) 53,000 76,000 Total liabilities 89,700 128,700 Equity Common stock, $5 par value 240,000 187,000 Retained earnings 25,300 7,500 Total liabilities and equity $ 355,000 $ 323,200 IKIBAN INC. Income Statement For Year Ended June 30, 2015 Sales $ 675,000 Cost of goods sold 409,000 Gross profit 266,000 Operating expenses Depreciation expense $ 57,900 Other expenses 66,400 Total operating expenses 124,300 141,700 Other gains (losses) Gain on sale of equipment 2,700 Income before taxes 144,400 Income taxes expense 57,760 Net income $ 86,640 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 $59,700 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.

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.) (2) Compute the company's cash flow on total assets ratio for its fiscal year 2015.

Answer 1

Statement of Cash Flow
Particulars	Amount	Amount
Cash Flow from Operating Activities
Net Income		$86,640
Adjustments for:
Depreciation	$57,900
Gain on sale of property, plant and equipment	($2,700)
		$55,200
Increase in Accounts receivable	($18,100)
Decrease in Inventory	$30,600
Decrease in Prepaid expenses	$800
Decrease in Accounts payable	($6,300)
Decrease in Income tax payable	($1,300)
Decrease in Wages Payable	($8,400)
		($2,700)
Net cash flow generated from Operating Activities		$139,140
Cash Flow from Investing Activities
Purchase of new equipment	($59,700)
Sold property, plant and equipment	$12,100
Net cash flow from Investing Activities		($47,600)
Cash Flow from Financing Activities
Payment on long-term note payable	($23,000)
Issued Common Stock	$53,000
Dividends paid (7500+86640-25300)	($68,840)
Net cash flow from Financing Activities		($38,840)
Net Cash Flow		$52,700
Cash and Cash Equivalent as on 30th Jun. 2014		$62,700
Cash and Cash Equivalent as on 30th Jun. 2015		$115,400

Accumulated depreciation account
account	amount	account	amount
		Balance c/f	$10,100
equipment -sold	$39,800	depreciation	$57,900
Balance c/d	$28,200
	$68,000		$68,000

cost of the equpment sold	49200
Less: accumulated depreciation	($39,800)
Book Value of equipment sold	$9,400
Add Profit on sale	2700
Cash received on sale	$12,100

Cash Flow from Total Assets Ratio = Cash From Operations / Total Assets

= $139140 / [($355000 + $323,200) / 2]

= $139140 / $339100= 41.03%