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. IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016 Assets Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets Liabilities and Equity Accounts payable Wages payable Income taxes payable Total current liabilities Notes payable (long term) Total liabilities Equity 2017 2016 $ 87,500 $ 44,000 65,000 51,000 63,800 86,500 4,400 5,400 220,700 186,900 124,000 115,000 (27,000) (9,000) $317,700 $292,900 $ 25,000 6,000 $ 30,000 15,000 3,400 3,800 34,400 48,800 30,000 60,000 64,400 108,800 Common stock, $5 par value 220,000 160,000 Retained earnings 33,300 24,100 Total liabilities and equity $317,700 $292,900 IKIBAN INC. Income Statement For Year Ended June 30, 2017 Sales $678,000 Cost of goods sold 411,000 Gross profit 267,000 Operating expenses Depreciation expense $58,600 Other expenses 67,000 Total operating expenses 125,600 141,400 Other gains (losses) Gain on sale of equipment 2,000 Income before taxes 143,400 Income taxes expense 43,890 Net income $ 99,510 Additional Information a. A $30,000 note payable is retired at its $30,000 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 $57,600 cash. d. Received cash for the sale of equipment that had cost $48,600, yielding a $2,000 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, 2017, using the Indirect method. (Amounts to be deducted should be indicated with a minus sign.) Answer is not complete. IKIBAN, INC. Statement of Cash Flows (Indirect Method) For Year Ended June 30, 2017 Cash flows from operating activities Net income 99,510 Adjustments to reconcile net income to net cash provided by operating activities Income statement items not affecting cash Decrease in inventory: 22,700 Decrease in prepaid expenses 1,000 Depreciation expense 18,000 Changes in current operating assets and liabilities Decrease in accounts payable (5,000) Increase in accounts payable (14,000) Decrease in wages payable (9,000) Decrease in income taxes payable (400) Gain on sale of plant assets (2,000) Required information Decrease in accounts payable Increase in accounts payable Decrease in wages payable Decrease in income taxes payable Gain on sale of plant assets (5,000) (14,000) (9,000) (400) (2,000) $ 110,810 Cash flows from investing activities Cash received from sale of equipment 50,600 Cash paid to retire notes (30,000) x Cash paid for equipment (57,600) (37,000) Cash flows from financing activities Cash received from stock issuance Cash paid for dividends 60,000 (90,310) (30,310) Net increase (decrease) in cash $ 43,500 Cash balance at prior year-end 44,000 Cash balance at current year-end $ 87,500