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  | 
||||||||
| 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.
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 | |
