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

Skip to question

[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, 2019 and 2018
	2019				2018
Assets
Cash	$	87,500			$	44,000
Accounts receivable, net		65,000				51,000
Inventory		63,800				86,500
Prepaid expenses		4,400				5,400
Total current assets		220,700				186,900
Equipment		124,000				115,000
Accum. depreciationEquipment		(27,000	)			(9,000	)
Total assets	$	317,700			$	292,900
Liabilities and Equity
Accounts payable	$	25,000			$	30,000
Wages payable		6,000				15,000
Income taxes payable		3,400				3,800
Total current liabilities		34,400				48,800
Notes payable (long term)		30,000				60,000
Total liabilities		64,400				108,800
Equity
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, 2019
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

1. A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash.
2. The only changes affecting retained earnings are net income and cash dividends paid.
3. New equipment is acquired for $57,600 cash.
4. Received cash for the sale of equipment that had cost $48,600, yielding a $2,000 gain.
5. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
6. All purchases and sales of inventory are on credit.

Exercise 16-11 Part 1

Required: (1) Prepare a statement of cash flows using the indirect method for the year ended June 30, 2019. (Amounts to be deducted should be indicated with a minus sign.) IKIBAN, INC. Statement of Cash Flows (Indirect Method) For Year Ended June 30, 2019 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 Depreciation expense 58,600 Gain on sale of plant assets (2,000) Changes in current operating assets and liabilities Increase in accounts receivable (14,000) Decrease in inventory 22,700 Decrease in prepaid expenses 1,000 Decrease in accounts payable (5,000) Decrease in wages payable (9,000) Decrease in income taxes payable (400) Net cash provided by operating activities $151,410 Cash flows from investing activities Cash received from sale of equipment Cash paid for equipment (57,600) Net cash used in investing activities (57,600) Cash flows from financing activities Cash received from stock issuance 60,000 Cash paid to retire notes Cash paid for dividends Net cash used in financing activities 60,000 Net increase (decrease) in cash $153,810 Cash balance at prior year-end Cash balance at current year-end $153,810