Exercise 12-11 Indirect: Preparation of 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 IKIBAN INC Comparative Balance Sheets June 30, 2015 and 2014 2015 2014 Assets Cash Accounts receivable, net Inventory Prepaid expenses $ 115,000 $65,600 51,400 96,200 6,000 69,600 66,600 4,800 Total current assets Equipment Accum. depreciation-Equipment 256,000 122,900 (28,100) 219,200 113,000 (10,800) Total assetS $350,80O 321,400 Liabilities and Equity Accounts payable Wages payable Income taxes payable $ 26,700 $32,600 6,000 4,500 7,500 2,100 53,100 76,000 36,300 Total current liabilities Notes payable (long term) 51,000 87,300 238,000 129,100 Total liabilities Equity Common stock, $5 par value Retained earnings 184,000 8,300 25,500 Total liabilities and equity $350,800 321,400 IKIBAN INC Income Statement For Year Ended June 30, 2015 Sales Cost of goods sold $ 674,000 406,000 Gross profit Operating expenses 268,000 Depreciation expense Other expenses $ 57,900 66,600 Total operating expenses 124,500 143,500 2,200 145,700 Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense 58,280 Net income $87,420 Additional Information a. A $25,000 note payable is retired at its $25,000 carrying (book) value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. C. New equipment is acquired for $59,100 cash. d. Received cash for the sale of equipment that had cost $49,200, yielding a $2,200 gain e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. f. All purchases and sales of inventory are on credit Required (1) Prepare a statement of cash flows for the year ended June 30, 2015, using the indirect method (Amounts to be deducted should be indicated with a minus sign.) IKIBAN, INC Statement of Cash Flows (Indirect Method) For Year Ended June 30, 2015 Cash flows from operating activities Net income Adjustments to reconcile net income to net cash provided by operating activities Income statement items not affecting cash Depreciation expense Gain on sale of plant assets S 87,420 57,900 (2.200) Changes in current operating assets and liabilities Increase in accounts receivable Decrease in inventory Decrease in prepaid expenses Decrease in accounts payable Decrease in wages payable Decrease in income taxes payable (18,200) 29,600 1,200 5,900 8,500 2,400 Net cash provided by operating activities Cash flows from investing activities 172,520 Cash received from sale of equipment Cash paid for equipment Net cash provided by investing activities Cash flows from financing activities Cash received from stock issuance Cash paid to retire notes Cash paid for dividends 25,000 25,000 $197,520 Net cash provided by financing activities Net increase (decrease) in cash Cash balance at prior year-end Cash balance at current year-end 197,520