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

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
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.

Solutions

Expert Solution

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


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