Question

The following financial statements and additional information are reported.

IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016
	2017				2016
Assets
Cash	$	87,500			$	44,000
Accounts receivable, net		65,000				51,000
Inventory		63,800				86,500
Prepaid expenses		4,400				5,400
Total current assets		220,700				186,900
Equipment		124,000				115,000
Accum. depreciation—Equipment		(27,000	)			(9,000	)
Total assets	$	317,700			$	292,900
Liabilities and Equity
Accounts payable	$	25,000			$	30,000
Wages payable		6,000				15,000
Income taxes payable		3,400				3,800
Total current liabilities		34,400				48,800
Notes payable (long term)		30,000				60,000
Total liabilities		64,400				108,800
Equity
Common stock, $5 par value		220,000				160,000
Retained earnings		33,300				24,100
Total liabilities and equity	$	317,700			$	292,900

  

IKIBAN INC. Income Statement For Year Ended June 30, 2017
Sales				$	678,000
Cost of goods sold					411,000
Gross profit					267,000
Operating expenses
Depreciation expense	$	58,600
Other expenses		67,000
Total operating expenses					125,600
					141,400
Other gains (losses)
Gain on sale of equipment					2,000
Income before taxes					143,400
Income taxes expense					43,890
Net income				$	99,510

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 $57,600 cash.

Received cash for the sale of equipment that had cost $48,600, yielding a $2,000 gain.

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

All purchases and sales of inventory are on credit.

Using the direct method, prepare the statement of cash flows for the year ended June 30, 2017.

Answer 1

IKIBAN Cor.

Statement of cash flows

For the year ending June 30, 2017

                                             For the year ended March 31 ,……..

Particulars	₹	₹
I. Cash flow from Operating Activities
Net income	99,510
Add: Provision for tax made	43,890
Add: Non-cash and non-operating expenses and losses:
Depreciation expense	58,600
Less: Gain on sale of equipment	-2,000
Operating profit before working capital changes	200,000
Add: Decrease in current assets
Inventory	22,700
Prepaid expenses	1,000
Less: Decrease in current liabilities
Accounts payable	- 5,000
Wages payable	- 9,000
Less: Increase in current assets
Accounts receivable	- 14,000
Cash generated from operations	195,700
Less: Tax paid	- 44,290
Net cash generated from Operating Activities		151,410
II. Cash flow from Investing Activities
Sale of equipment	10,000
Purchase of equipment	- 57,600
Net cash used in Investing Activities		- 47,600
III. Cash flow from Financing Activities
Issue of common stock	60,000
Cash paid for notes payable	- 30,000
Cash dividend paid	- 90,310
Net cash used in Financing Activities		- 60,310
Net increase in Cash and Cash Equivalents(I +II +III)		43,500
Add: Cash and cash equivalents in the beginning of the period		44,000
Cash and cash equivalents at the end of the period		87,500

Working notes:

Equipment Account

Balance b/d	115,000	Cash (sale)(bal. fig.)	10,000
Gain on sale	2,000	Accumulated depreciation	40,600
Cash (Purchase)	57,600	Balance c/d	124,000

Accumulated Depreciation Account

Equipment (Bal. fig.)	40,600	Balance b/d	9,000
Balance c/d	27,000	Depreciation	58,600
	67,600		67,600

Income tax payable account

Cash (Tax paid) (Bal .fig.)	44,290	Balance b/d	3,800
Balance c/d	3,400	Provision for tax made	43,890
	47,690		47,690

Calculation of cash dividend paid

Retained earnings, begining	24,100
+ Net income	99,510
- Retained earnings, ending	- 33,300
Hence, cash dividend paid	90,310

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