Question

Required information

[The following information applies to the questions displayed below.]

The following financial statements and additional information are reported.

IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016
	2017				2016
Assets
Cash	$	105,100			$	48,000
Accounts receivable, net		71,000				55,000
Inventory		67,800				92,500
Prepaid expenses		4,800				6,200
Total current assets		248,700				201,700
Equipment		128,000				119,000
Accum. depreciation—Equipment		(29,000	)			(11,000	)
Total assets	$	347,700			$	309,700
Liabilities and Equity
Accounts payable	$	29,000			$	36,000
Wages payable		6,400				15,800
Income taxes payable		3,800				4,600
Total current liabilities		39,200				56,400
Notes payable (long term)		34,000				64,000
Total liabilities		73,200				120,400
Equity
Common stock, $5 par value		228,000				164,000
Retained earnings		46,500				25,300
Total liabilities and equity	$	347,700			$	309,700

  

IKIBAN INC. Income Statement For Year Ended June 30, 2017
Sales				$	698,000
Cost of goods sold					415,000
Gross profit					283,000
Operating expenses
Depreciation expense	$	62,600
Other expenses		71,000
Total operating expenses					133,600
					149,400
Other gains (losses)
Gain on sale of equipment					2,400
Income before taxes					151,800
Income taxes expense					44,290
Net income				$	107,510

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 $61,600 cash.

Received cash for the sale of equipment that had cost $52,600, yielding a $2,400 gain.

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

All purchases and sales of inventory are on credit.

rev: 06_20_2017_QC_CS-91585, 12_05_2017_QC_CS-111198

Using the direct method, prepare the statement of cash flows for the year ended June 30, 2017. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Solution:

IKIBAN INC
Cash Flow Statement (Direct Method) For the Year Ended June 30, 2017
Cash Flow from Operating Activities:		$$	$$
+	Cash Received from Customers (Note 1)	$682,000
-	Cash paid for purchases of inventory (Note 2)	-$397,300
-	Cash paid for other operating expense (Note 3)	-$79,000
-	Cash Paid for Income Taxes (refer Note 5)	-$45,090
Net Cash Provided by Operative Activities			$160,610
Cash Flow from Investing Activities:
-	Purchase of Equipment	-$61,600
+	Sale of Equipment (Refer Note 6)	$10,400
Net Cash used by Investing Activities			-$51,200
Cash Flow from Financing Activities:
-	Repayment of Loan	-$30,000
+	Proceeds from Issuance of Common Stock (228,000 - 164,000)	$64,000
-	Cash Dividend Paid (25300 + net income 107510 - Ending 46500)	-$86,310
Net Cash used by Financing Activities			-$52,310
Net Increase/(Decrease) in Cash and Cash Equivalents			$57,100
Cash and Cash Equivalents at the beginning of the year			$48,000
Cash and Cash Equivalents at the end of the year			$105,100

Note 1 -- Cash receipts from Customers
Beginning Accounts Receivable	$55,000
Plus: Credit Sales made during the year	$698,000
Less: Ending Accounts Receivable	-$71,000
Cash Collected from Customers	$682,000
Note 2 -- Cash payment for merchandise
Beginning Accounts Payable	$36,000
Plus: Purchases made during the year (refer note 3)	$390,300
Less: Ending Accounts Payable	-$29,000
Cash Paid to Supplier during the year	$397,300
Note 3 -- Purchase made during the year
Cost of Goods Sold	$415,000
Plus: Ending Inventory	$67,800
Less: Beginning Inventory	-$92,500
Purchases made during the year	$390,300
Note 4 -- Cash paid for Wages and other operating expenses
Beginning Wages Payable	$15,800
Ending Prepaid Expense	$4,800
Add: Other Operating Expense	$71,000
Less: beg. Prepaid expense	-$6,200
Less: Ending Wages Payable	-$6,400
Cash Paid for Operating Expense	$79,000

Note 5 --

Income Taxes
Cash Paid (Bal Fig)	45090	Beg. Bal	4600
Ending Bal	3800	Income tax Expense (Refer Income statement)	44290
	48890		48890

Note 6 – Cash received from sale of equipment

Equipment
beg. Bal	119000	Cost of Equipment Sold	52600
Purchase	61600	Ending Bal	128000
	180600		180600
Accumulated Depreciation
Depreciation related to Equipment Sold (bal fig)	44600	beg Bal	11000
Ending Bal	29000	Depreciation Expense (refer Income statement)	62600
	73600		73600

Cost of Equipment Sold = $52,600

Less: Accumulated Depreciation = ($44,600)

Book Value of Equipment Sold = 52600 – 44600 = $8,000

Cash Received from Sale of Equipment = Book Value + Gain on Sale = 8,000 + 2400 = $10,400

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you