Exercise 16-11 Indirect: Preparing statement of cash flows LO P1, P2, P3, A1

PART 2

2016 IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016 2017 Assets Cash $ 80,900 Accounts receivable, net 81,500 Inventory 74,800 Prepaid expenses 5,500 Total current assets 242,700 Equipment 135,000 Accum. depreciation-Equipment (32,500) Total assets $345,200 Liabilities and Equity Accounts payable $ 36,000 Wages payable 7,100 Income taxes payable 4,500 Total current liabilities 47,600 Notes payable (long term) 41,000 Total liabilities 88,600 Equity Common stock, $5 par value 242,000 Retained earnings 14,600 Total liabilities and equity $ 345,200 $ 55,000 62,000 103,000 7,600 227,600 126,000 (14,500) $339, 100 $ 46,500 17,200 6,000 69, 700 71,000 140, 700 171,000 $339,100 IKIBAN INC. Income Statement For Year Ended June 30, 2017 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $69,600 Other expenses 78,000 Total operating expenses $ 733,000 422,000 311,000 147,600 163,400 Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense Net income 3,100 166,500 44,990 $121,510 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 $68,600 cash. d. Received cash for the sale of equipment that had cost $59,600, yielding a $3,100 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. IKIBAN, INC. Statement of Cash Flows (Indirect Method) For Year Ended June 30, 2017 Cash flows from operating activities Net income $ 121,510 Adjustments to reconcile net income to net cash provided by operating activities Income statement items not affecting cash Depreciation expense 69,600 Cash received from sale of equipment (3,100) Changes in current operating assets and liabilities Increase in accounts receivable Decrease in inventory Decrease in prepaid expenses Decrease in income taxes payable Decrease in wages payable 19,500 28,200 2,100 1,500 10,100 Decrease in accounts payable 10,500 $ 259,910 Net cash provided by operating activities Cash flows from investing activities Cash received from sale of equipment Cash paid for equipment 68,600 68,600 Cash flows from financing activities Cash paid to retire notes Cash received from stock issuance Cash paid for dividends 30,000 71,000 101,000 429,510 $ Net increase (decrease) in cash Cash balance at prior year-end 68,600 Cash flows from financing activities Cash paid to retire notes Cash received from stock issuance Cash paid for dividends 30,000 71,000 101,000 429,510 $ Net increase (decrease) in cash Cash balance at prior year-end Cash balance at current year-end $ 429,510 Exercise 16-11 Part 2 (2) Compute the company's cash flow on total assets ratio for its fiscal year 2017. Choose Numerator: Cash Flow on Total Assets Ratio Choose Denominator: = Cash Flow on Total Assets Ratio Cash flow on total assets ratio