Exercise 16-11 Indirect: Preparing statement of cash flows LO P1, P2, P3, A1 [Th
ID: 2338706 • Letter: E
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.
Comparative Balance Sheets
June 30, 2017 and 2016 2017 2016 Assets Cash $ 101,500 $ 54,000 Accounts receivable, net 80,000 61,000 Inventory 73,800 101,500 Prepaid expenses 5,400 7,400 Total current assets 260,700 223,900 Equipment 134,000 125,000 Accum. depreciation—Equipment (32,000 ) (14,000 ) Total assets $ 362,700 $ 334,900 Liabilities and Equity Accounts payable $ 35,000 $ 45,000 Wages payable 7,000 17,000 Income taxes payable 4,400 5,800 Total current liabilities 46,400 67,800 Notes payable (long term) 40,000 70,000 Total liabilities 86,400 137,800 Equity Common stock, $5 par value 240,000 170,000 Retained earnings 36,300 27,100 Total liabilities and equity $ 362,700 $ 334,900 The following financial statements and additional information are reported IKIBAN INC Comparative Balance Sheets June 30, 2017 and 2016 2017 2016 Assets Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Equipment Accum. depreciation- Equipment Total assets Liabilities and Equity Accounts payable Wages payable Income taxes payable $101,500 54,000 61,000 101,500 5,400 7,400 260,700 223,900 125,000 80,000 73,800 134,000 (32,000) (14,000) $362,700 $334,900 $ 35,000 45,000 17,000 4,4005,800 67,800 70,000 137,800 7,000 Total current liabilities 46,400 Notes payable (long term) 40,000 86,400 Total liabilities Equity Common stock, $5 par value Retained earnings Total liabilities and equity 170,000 240,000 36,300 27,100 $362,700 $334,900 IKIBAN INC Income Statement For Year Ended June 30, 2017 Sales Cost of goods sold Gross profit Operating expenses $728,000 421,000 307,000 Depreciation expense Other expenses $68,600 77,000 Total operating expenses 145,600 161,400 Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense Net income 3,000 164,400 44,890 $119,510
Explanation / Answer
IKIBAN, INC.
Statement of cash flows ( Indirect method)
For the year ended June 30, 2017
(Amount in $)
(Amount in $)
Cash flows from Operating Activities
Net Income
119,510
Adjustments to reconcile net income to net cash provided
by operating activities:
Income statement items not affecting cash:
Depreciation expenses
68,600
Gain on sale of equipment
(3,000)
Changes in current operating assets and liabilities:
Increase in Accounts receivables
(19,000)
Decrease in inventory
27,700
Decrease in Prepaid expenses
2,000
Decrease in Accounts Payable
(10,000)
Decrease in wages payable
(10,000)
Decrease in income tax payable
(1400)
Net cash provided by operating activities
174,410
Cash flows from Investing Activities
Cash paid for equipment
(67,600)
Cash received from Sale of equipment
11,000
Net cash used in investing activities
(56,600)
Cash flows from Financing Activities
Cash received from stock issue
70,000
Cash paid to retire notes
(30,000)
Cash paid for dividends
(110,310)
Net cash used in financing activities
(70,310)
Net increase (decrease) in cash
47,500
Cash balance at prior year end
54,000
Cash balance at current year end
101,500
Cash received from sale of equipment = Cost- Accumulated depreciation on equipment)+gain on sale
= 58600-(14000+68600-32000)+3000
= 11000
IKIBAN, INC.
Statement of cash flows ( Indirect method)
For the year ended June 30, 2017
(Amount in $)
(Amount in $)
Cash flows from Operating Activities
Net Income
119,510
Adjustments to reconcile net income to net cash provided
by operating activities:
Income statement items not affecting cash:
Depreciation expenses
68,600
Gain on sale of equipment
(3,000)
Changes in current operating assets and liabilities:
Increase in Accounts receivables
(19,000)
Decrease in inventory
27,700
Decrease in Prepaid expenses
2,000
Decrease in Accounts Payable
(10,000)
Decrease in wages payable
(10,000)
Decrease in income tax payable
(1400)
Net cash provided by operating activities
174,410
Cash flows from Investing Activities
Cash paid for equipment
(67,600)
Cash received from Sale of equipment
11,000
Net cash used in investing activities
(56,600)
Cash flows from Financing Activities
Cash received from stock issue
70,000
Cash paid to retire notes
(30,000)
Cash paid for dividends
(110,310)
Net cash used in financing activities
(70,310)
Net increase (decrease) in cash
47,500
Cash balance at prior year end
54,000
Cash balance at current year end
101,500
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