Question

Exercise 12-11 Indirect: Preparing statement of cash flows LO P1, P2, P3, A1

[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	$	99,700			$	57,000
Accounts receivable, net		84,500				64,000
Inventory		76,800				106,000
Prepaid expenses		5,700				8,000
Total current assets		266,700				235,000
Equipment		137,000				128,000
Accum. depreciation—Equipment		(33,500	)			(15,500	)
Total assets	$	370,200			$	347,500
Liabilities and Equity
Accounts payable	$	38,000			$	49,500
Wages payable		7,300				17,600
Income taxes payable		4,700				6,400
Total current liabilities		50,000				73,500
Notes payable (long term)		43,000				73,000
Total liabilities		93,000				146,500
Equity
Common stock, $5 par value		246,000				173,000
Retained earnings		31,200				28,000
Total liabilities and equity	$	370,200			$	347,500

  

IKIBAN INC. Income Statement For Year Ended June 30, 2017
Sales				$	743,000
Cost of goods sold					424,000
Gross profit					319,000
Operating expenses
Depreciation expense	$	71,600
Other expenses		80,000
Total operating expenses					151,600
					167,400
Other gains (losses)
Gain on sale of equipment					3,300
Income before taxes					170,700
Income taxes expense					45,190
Net income				$	125,510

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 $70,600 cash.

Received cash for the sale of equipment that had cost $61,600, yielding a $3,300 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 sign.)

Answer 1

Cash Flow from Operating Activity:-	Amount	Amount
Net Income	125510
Gain on Equipment sold	(3300)
Depreciation	71600
Increase A/c Receivable	(20500)
Decrease Inventory	29200
Decrease Prepaid Exp	2300
Decrease A/c Payable	(11500)
Decrease Wage Payable	(10300)
Imcome Tax Exp	45190
Paid Income Tax (45190+6400-4700)	(46890)
Cash Flow from Operating Activity (A)	181310	181310
Cash Flow from Investing Activity:-
Equipment Purchase	(70600)
Equipment Sold (61600-50300)	11300
Cash Flow from Investing Activity (B)	(59300)	(59300)
Cash Flow from Financing Activity:-
Notes Paid	(30000)
Dividend Paid	(122310)
Common stock issue	73000
	(79310)	(79310)
TOTAL CASH FLOW (a+b+c)		42700
Add opening cash		57000
Closing cash		99700