Exercise 12-11 Indirect: Preparing statement of cash flows LO P1, P2, P3, A1 [Th
ID: 2559658 • Letter: E
Question
Exercise 12-11 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.
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 $70,600 cash.
Received cash for the sale of equipment that had cost $61,600, yielding a $3,300 gain.
Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
All purchases and sales of inventory are on credit.
(2) Compute the company's cash flow on total assets ratio for its fiscal year 2017.
Comparative Balance Sheets
June 30, 2017 and 2016 2017 2016 Assets Cash $ 79,700 $ 57,000 Accounts receivable, net 84,500 64,000 Inventory 76,800 106,000 Prepaid expenses 5,700 8,000 Total current assets 246,700 235,000 Equipment 137,000 128,000 Accum. depreciation—Equipment (33,500 ) (15,500 ) Total assets $ 350,200 $ 347,500 Liabilities and Equity Accounts payable $ 38,000 $ 49,500 Wages payable 7,300 17,600 Income taxes payable 4,700 6,400 Total current liabilities 50,000 73,500 Notes payable (long term) 43,000 73,000 Total liabilities 93,000 146,500 Equity Common stock, $5 par value 246,000 173,000 Retained earnings 11,200 28,000 Total liabilities and equity $ 350,200 $ 347,500
Explanation / Answer
Cash flow on total assets = Operating cash flows / Average total assets
Cash flow on total assets = $181,310 / (($350,200+$347,500)/2)
Cash flow on total assets = 0.519736
IKIBAN INC Cash Flow Statement For the year ended December 31, 2017 Cash flows from operating activities Net Income $ 125,510 Adjustment to reconcile net income to: Depreciation expense $ 71,600 Gain on sale of equipment $ (3,300) Increase in accounts receivable $ (20,500) Decrease in inventory $ 29,200 Decrease in prepaid expenses $ 2,300 Decrease in accounts payable $ (11,500) Decrease in wages payable $ (10,300) Decrease in income tax payable $ (1,700) $ 55,800 Net cash provided by operating activities $ 181,310Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.