[The following information applies to the questions displayed below.] The follow

Question

[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 $63,600 cash.

Received cash for the sale of equipment that had cost $54,600, yielding a $2,600 gain.

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

All purchases and sales of inventory are on credit.

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 $ 83,900 $ 50,000 Accounts receivable, net 74,000 57,000 Inventory 69,800 95,500 Prepaid expenses 5,000 6,600 Total current assets 232,700 209,100 Equipment 130,000 121,000 Accum. depreciation—Equipment (30,000 ) (12,000 ) Total assets $ 332,700 $ 318,100 Liabilities and Equity Accounts payable $ 31,000 $ 39,000 Wages payable 6,600 16,200 Income taxes payable 4,000 5,000 Total current liabilities 41,600 60,200 Notes payable (long term) 36,000 66,000 Total liabilities 77,600 126,200 Equity Common stock, $5 par value 232,000 166,000 Retained earnings 23,100 25,900 Total liabilities and equity $ 332,700 $ 318,100

Explanation / Answer

IKIBAN INC. Cash Flow Statement For year ended 31 December 2017 Cash flows from operating activities Net Income $ 111,510 Adjustment to reconcile net income to: Depreciation expense $      64,600 Gain on sale of equipment $      (2,600) Increase in accounts receivable $   (17,000) Decrease in inventory $      25,700 Decrease in prepaid expenses $        1,600 Decrease in accounts payable $      (8,000) Decrease in wages payable $      (9,600) Increase in Income tax payable $      (1,000) $    53,700 Net cash provided by operating activities $ 165,210 Cash flows from investing activities Proceeds from sale of equipment $      10,600 $54,600-($12,000+$64,600-$30,000)+$2,600 Purchase of equipment $   (63,600) Net cash used by investing activities $ (53,000) Cash flows from financing activities Cash received from stock issuance $      66,000 Retiring of note payable $   (30,000) Dividend paid $ (114,310) $23,100-$25,900-$111,510 Net cash provided by financing activities $ (78,310) Net increase in cash and cash equivalents $    33,900 Cash and cash equivalents at beginning of period $    50,000 Cash and cash equivalents at end of period $    83,900

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