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.

Required:

(1) Prepare a statement of cash flows for the year ended June 30, 2017, using the indirect method. (Amounts to be deducted should be indicated with a minus sig

Answer 1

IKIBAN INC
Partial Statement of Cash Flows
For the Year Ended December 31, 2017
Cash flows from operating activities
Net Income		$   149,510
Adjustments to reconcile net income to :
Depreciation expense	$      83,600
Gain on sale of equipment	$      (4,500)
Increase in accounts receivable	$   (26,500)		76000-102500
Decrease in inventory	$      35,200		124000-88800
Decrease in prepaid expenses	$        3,500		10400-6900
Decrease in accounts payable	$   (17,500)		50000-67500
Decrease in wages payable	$   (11,500)		8500-20000
Decrease in income tax payable	$      (2,900)		5900-8800
		$      59,400
Net cash flow from operating activities		$   208,910
Cash flows from investing activities
Cash paid for purchase of equipment	$   (82,600)
Cash received from sale equipment	$      12,500		73600+39500-21500-83600+4500
Net cash used by investing activities		$   (70,100)
Cash flows from financing activities
Cash received as common stock	$      85,000		270000-185000
Dividends paid	$ (170,310)		10800-31600-149510
Cash paid to retire notes	$   (30,000)
Net cash used by financing activities		$ (115,310)
Net Decrease in cash and cash equivalents		$      23,500
Cash and cash equivalents at beginning of period		$      69,000
Cash and cash equivalents at end of period		$      92,500