In: Accounting
Required information
Exercise 12-11 Indirect: Preparing statement of cash flows LO P1, P2, P3, A1
The following financial statements and additional information
are reported.
IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016 |
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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 |
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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.
Solution:-
IKIBAN, INC. | ||
Statement of Cash Flows (Indirect Method) | ||
For Year Ended June 30, 2017 | ||
Cash flows from operating activities |
||
Net income |
107,510 | |
Adjustments to reconcile net income to net cash provided by operating activities |
||
Income statement items not affecting cash |
||
Depreciation expense |
62,600 | |
Gain on sale of plant assets |
(2,400) | |
Changes in current operating assets and liabilities |
||
Increase in accounts receivable |
(16,000) | |
Decrease in inventory |
24,700 | |
Decrease in prepaid expenses |
1,400 | |
Decrease in accounts payable |
(7,000) | |
Decrease in wages payable |
(9,400) | |
Decrease in income taxes payable |
(800) | |
Net cash provided by operating activities |
160,610 | |
Cash flows from investing activities |
||
Cash received from sale of equipment |
10,400 | |
Cash paid for equipment |
(61,600) | |
Net cash used in investing activities |
(51,200) | |
Cash flows from financing activities |
||
Cash received from stock issuance |
64,000 | |
Cash paid to retire notes |
(30,000) | |
Cash paid for dividends |
(86,310) | |
Net cash used in financing activities |
(52,310) | |
Net increase (decrease) in cash | 57,100 | |
Cash balance at prior year-end |
48,000 | |
Cash balance at current year-end | 105,100 |