Question

The following financial statements and additional information are reported.

IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016
	2017				2016
Assets
Cash	$	95,500			$	64,000
Accounts receivable, net		95,000				71,000
Inventory		83,800				116,500
Prepaid expenses		6,400				9,400
Total current assets		280,700				260,900
Equipment		144,000				135,000
Accum. depreciation—Equipment		(37,000	)			(19,000	)
Total assets	$	387,700			$	376,900
Liabilities and Equity
Accounts payable	$	45,000			$	60,000
Wages payable		8,000				19,000
Income taxes payable		5,400				7,800
Total current liabilities		58,400				86,800
Notes payable (long term)		50,000				80,000
Total liabilities		108,400				166,800
Equity
Common stock, $5 par value		260,000				180,000
Retained earnings		19,300				30,100
Total liabilities and equity	$	387,700			$	376,900

  

IKIBAN INC. Income Statement For Year Ended June 30, 2017
Sales				$	778,000
Cost of goods sold					431,000
Gross profit					347,000
Operating expenses
Depreciation expense	$	78,600
Other expenses		87,000
Total operating expenses					165,600
					181,400
Other gains (losses)
Gain on sale of equipment					4,000
Income before taxes					185,400
Income taxes expense					45,890
Net income				$	139,510

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 $77,600 cash.

Received cash for the sale of equipment that had cost $68,600, yielding a $4,000 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

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.)

IKIBAN, INC.
Statement of Cash Flows (Indirect Method)
For Year Ended June 30, 2017
Cash flows from operating activities
Adjustments to reconcile net income to net cash provided by operating activities
Income statement items not affecting cash
Changes in current operating assets and liabilities
		$0
Cash flows from investing activities
		0
Cash flows from financing activities
		0
Net increase (decrease) in cash		$0
Cash balance at prior year-end
Cash balance at current year-end		$0

(2) Compute the company's cash flow on total assets ratio for its fiscal year 2017.

Cash Flow on Total Assets Ratio
Choose Numerator:	/	Choose Denominator:	=	Cash Flow on Total Assets Ratio
	/		=	Cash flow on total assets ratio
	/		=	0

Answer 1

(1) Prepare a statement of cash flows for the year ended June 30, 2017, using the indirect method.

IKIBAN, INC.
Statement of Cash Flows (Indirect Method)
For Year Ended June 30, 2017
Cash flows from operating activities
Net income		139510
Adjustments to reconcile net income to net cash provided by operating activities
Income statement items not affecting cash
Depreciation expenses	78600
Gain on sale of equipment	(4000)
Changes in current operating assets and liabilities
Increase account receivable	(24000)
Decrease inventory	32700
Decrease prepaid expenses	3000
Decrease account payable	(15000)
Decrease wages payable	(11000)
Decrease income tax payable	(2400)
Net cash flow from operating activities		$197410
Cash flows from investing activities
Purchase of equipment	(77600)
Sale of equipment	12000
Net cash flow from investing activities		(65600)
Cash flows from financing activities
Dividend paid	(150310)
Repaid notes payable	(30000)
Issue common stock	80000
Net cash flow from financing activities		(100310)
Net increase (decrease) in cash		$31500
Cash balance at prior year-end		64000
Cash balance at current year-end		$95500

(2) Compute the company's cash flow on total assets ratio for its fiscal year 2017.

Cash Flow on Total Assets Ratio
Choose Numerator:	/	Choose Denominator:	=	Cash Flow on Total Assets Ratio
Cash flow from operation	/	Average Total assets	=	Cash flow on total assets ratio
197410	/	382300	=	0.52