Additional Information A $30,000 note payable is retired at its $30,000 carrying

Question

  

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 $82,600 cash.

Received cash for the sale of equipment that had cost $73,600, yielding a $4,500 gain.

Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.

All purchases and sales of inventory are on credit.

Exercise 16-11 Part 1

Required:

(1) Prepare a statement of cash flows for the year ended June 30, 2017, using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

IKIBAN INC.
Comparative Balance Sheets
June 30, 2017 and 2016 2017 2016 Assets Cash $ 92,500 $ 69,000 Accounts receivable, net 102,500 76,000 Inventory 88,800 124,000 Prepaid expenses 6,900 10,400 Total current assets 290,700 279,400 Equipment 149,000 140,000 Accum. depreciation—Equipment (39,500 ) (21,500 ) Total assets $ 400,200 $ 397,900 Liabilities and Equity Accounts payable $ 50,000 $ 67,500 Wages payable 8,500 20,000 Income taxes payable 5,900 8,800 Total current liabilities 64,400 96,300 Notes payable (long term) 55,000 85,000 Total liabilities 119,400 181,300 Equity Common stock, $5 par value 270,000 185,000 Retained earnings 10,800 31,600 Total liabilities and equity $ 400,200 $ 397,900

Explanation / Answer

Cash flow statement: Cash flow from operating activities Net income for the year 149510 Adjustment require gain on sale of equipment -4,500 Depreciation 83,600 Increas ein accounts receivbale -26,500 Decrease in inventory 35,200 Decrease in inventory 3,500 Decrease in Accounts payable -17,500 Decreasse in wages payable -11,500 Decrease in Income taxx payable -2900 Net cahs provided from operating activities 208910 cash flows from investing activities Equipment purchased -82600 Equipment sold 12500 (73600+4500-65600) Net Cash used in investing activities -70100 Cash flows form financing activities: Note payable retired -30000 Issue of Common Stockc 85000 Dividend paid (31600+149510-10800) -170310 Net cash used in financing activities -115310 Net cash increasae 23500 beginning Balance in cash 69000 Ending balance in cash 92500

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