Question

The following financial statements and additional information are reported.

IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016
	2017				2016
Assets
Cash	$	106,900			$	45,000
Accounts receivable, net		66,500				52,000
Inventory		64,800				88,000
Prepaid expenses		4,500				5,600
Total current assets		242,700				190,600
Equipment		125,000				116,000
Accum. depreciation—Equipment		(27,500	)			(9,500	)
Total assets	$	340,200			$	297,100
Liabilities and Equity
Accounts payable	$	26,000			$	31,500
Wages payable		6,100				15,200
Income taxes payable		3,500				4,000
Total current liabilities		35,600				50,700
Notes payable (long term)		31,000				61,000
Total liabilities		66,600				111,700
Equity
Common stock, $5 par value		222,000				161,000
Retained earnings		51,600				24,400
Total liabilities and equity	$	340,200			$	297,100

  

IKIBAN INC. Income Statement For Year Ended June 30, 2017
Sales				$	683,000
Cost of goods sold					412,000
Gross profit					271,000
Operating expenses
Depreciation expense	$	59,600
Other expenses		68,000
Total operating expenses					127,600
					143,400
Other gains (losses)
Gain on sale of equipment					2,100
Income before taxes					145,500
Income taxes expense					43,990
Net income				$	101,510

Additional Information

1. A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash.
2. The only changes affecting retained earnings are net income and cash dividends paid.
3. New equipment is acquired for $58,600 cash.
4. Received cash for the sale of equipment that had cost $49,600, yielding a $2,100 gain.
5. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
6. All purchases and sales of inventory are on credit.

Required:

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

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

Answer 1

IKIBAN Inc. Equipment 116000 Sale 58600 Bal. Cash 49600 101510 Bal 125000 174600 174600 Statement of Cashflows - Indirect Method For the period ending 30.6.2015 Cashflow from Operating Activity Net Income Adjustments: Depreciation Expense Gain on sale of Equipment Increase in Accounts Receivable Decrease in Inventory Decrease in Prepaid Expenses Decrease in Accounts Payable Decrease in Wages Payable Decrease in Income Tax Payable Cash generated from Operating Activity 59600 -2100 -14500 23200 1100 -5500 -9100 -500 Accum. Depre Bal 41600 Depreciation Expense 9500 59600 Sale Bal 27500 69100 69100 52200 153710 Equip Gain on sale Sale of Equip 49600 Accum Depre 2100 Cash 41600 10100 Cashflow from Investing Activity Equipment Purchased Sale of Equipment Cash used for Investment Activity -58600 10100 -48500 51700 51700 -30000 61000 -74310 Cashflow from Financing Activity Note Patable paid off Common Stock issued Dividends paid (24100 +99510 - 33300) Cash used for Financing Activity Net Increase in Cash Beginning Cash Balance Ending Cash Balance Cash Flow on Total Assets ratio = Cashflow from Operations Average Total Assets = 153710/(340200 + 297100)/2 = 153710 / 318650 = 0.482 -43310 61900 45000 106900