The following financial statements and additional information are reported. Addi

Question

The following financial statements and additional information are reported.

  

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.

rev: 12_05_2017_QC_CS-111198

Exercise 12-11 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.)

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

Golden Corp., a merchandiser, recently completed its 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, (5) Other Expenses are all cash expenses, and (6) any change in Income Taxes Payable reflects the accrual and cash payment of taxes. The company’s balance sheets and income statement follow.

  

Problem 12-6A Indirect: Statement of cash flows LO P1, P2, P3

Additional Information on Year 2017 Transactions

Purchased equipment for $49,500 cash.

Issued 12,800 shares of common stock for $5 cash per share.

Declared and paid $97,000 in cash dividends.

Required:
Prepare a complete statement of cash flows; report its cash inflows and cash outflows from operating activities according to 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 $ 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

Explanation / Answer

1.

WN1

To find out cash received from sale of equipment, we have to calculate book value of the assets and need to add gain on sales. to calculate book value first we need to find out accumulated depreciation of sold equipment.

no we can calculate cash received;

WN 2

2.

Cashflow on total assets ratio = Cash flow from operations / Average total assets

Cashflow on total assets ratio = $160,610 / (($347,700 + $309,700)/2)

Cashflow on total assets ratio = $160,610 / $328,700

Cashflow on total assets ratio = 0.4886

IKIBAN INC Cash Flow Statement   For the year ended June 30, 2017 Cash flows from operating activities Net Income $ 107,510 Adjustment to reconcile net income to: Income statement items not affecting cash Depreciation expense $   62,600 Gain on sale of equipment $   (2,400) Change in current operating assets and liabilities Increase in accounts receivable $ (16,000) $55,000-$71,000 Decrease in inventory $   24,700 $92,500-$67,800 Decrease in prepaid expenses $      1,400 $6,200-$4,800 Decrease in accounts payable $   (7,000) $29,000-$36,000 Decrease in wages payable $   (9,400) $6,400-$15,800 Decrease in income tax payable $       (800) $3,800-$4,600 $    53,100 Net cash flow from operating activities $ 160,610 Cash flows from investing activities Cash paid for Purchase of equipment $ (61,600) Cash received from sale of equipment $   10,400 WN 1 Net cash used for investing activities $ (51,200) Cash flows from financing activities Cash received from issuance of common stock $   64,000 $228,000-$164,000 Cash paid to retire note payable $ (30,000) Cash paid for dividend $ (86,310) WN 2 Net cash used by financing activities $ (52,310) Net increase in cash and cash equivalents $    57,100 Cash and cash equivalents at beginning of period $    48,000 Cash and cash equivalents at end of period $ 105,100

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