Question

Exercise 16-11 Indirect: Preparing statement of cash flows LO P1, P2, P3, A1 The following information applies to the questions displayed below) The following financial statements and additional Information are reported. IKIBAN INC. Comparative Balance sheets June 30, 2017 and 2016 2017 Accounts receivable, net $ 87,500 65.000 63.800 4,400 220,700 124,000 27.0992 $317.700 44,000 51,000 86.500 5.400 186,900 115,000 12,000) $292,900 Prepaid expenses Total current assets Equipment Accum. depreciation Equipment Total assets Liabilities and Equity Accounts payable Wages payable Income taxes payable Total current liabilities Notes payable long term) Total liabilities Equity Common stock, $5 par value Retained earnings Total liabilities and equity IKIRAN INC. Income Statement For Year Ended June 30, 2017 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $58,600 Other expenses 67,000 Total operating expenses $678,000 411,000 267,000 125.600 141.400 Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense Net Income 2,000 143,400 43.890 $ 99,510 Additional Information a. A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid, c. New equipment is acquired for $57,600 cash. d. Received cash for the sale of equipment that had cost $48,600, yielding a $2,000 gain. e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. f. All purchases and sales of inventory are on credit.

Answer 1

$ 99,510 $ S 58,600 (2.000) $ 56,600 IKIBAN INC Statement of Cash Flows (Indirect Method) For year Ended June 30,2017 Cash flows from operating activities Net Income Addustments to reconcile net income to net cash flow from operating activities Income statement items not effecting cash Depreciation Gain on Sale of Investment Changes in Current operating assets and liabilities Increase in accounts receivables Decrease in Inventory Decrease in Prepaid Expenses Decrease in Accounts payable Decrease in Wages payable Decrease in Income Tax payable Net cash flow From operating activities Cash flows from investing activities: Cash from sale of Equipment Cash used for purchase of equipment Net cash flow from investing activities $ $ $ S $ $ (14,000) 22,700 1.000 (5,000) 9,000) (400) S (4.700) $ 151,410 $ $ 10,000 (57,600 $ (47.600)

$ S $ Cash flows from Financing activities: Cash paid for dividends Repayment of Notes payable Cash from sale of common stock Net cash flow from financing activities Increase in cash Cash balance at prior year end Cash balance at current year end Working Notes: Cash from sale of Equipment Gross Value of Equipment Less: Depreciation of sale of Equipment ($57,600+$10,800-$29,000) Net cost of Equipment Add: Gain on sale of Equipment 90,3101 (30.000) 60,000 $ 60,310) $ 43,500 $ 44,000 $ 87,500 $ S $ S $ 48,600 40.600 8.000 2.000 10.000 Cash paid for dividends Opening balance of Retained earnings Add: Net Income $ $ $ $ $ 24,100 99,510 123,610 33,300 90,310 Less: closing balance of Retained earnings

Cash Flow on Total Assets Ratio Choose Denominator = Cash Flow on Total Assets Ratio Cash flow from operating activities Average Total assets = Cash Flow on Total Assets Ratio 151,410 / $ 305,300 = 49.59% Avearge Total assets = ($317,700+$292,900)/2 = $305,300