Required information Exercise 12-11 Indirect: Preparing statement of cash flows LO P2, P3, A [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 $ 95,500 95,000 83,800 6,400 280,700 144,000 (37,000 $387,700 $ 64,000 71,000 116,500 9,400 260,900 135,000 (19,000) $376,900 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 Common stock, $5 par value Retained earnings Total liabilities and equity $ 45,000 8,000 5,400 58,400 50,000 108,400 $ 60,000 19,000 7,800 86,800 80,000 166,800 260,000 19,300 $387,700 180,000 30,100 $376,900 IKIBAN INC. Income Statement For Year Ended June 30, 2019 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $78,600 Other expenses 87,000 Total operating expenses $778,000 431,000 347,000 165,600 181,400 Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense 4,000 185,400 45,890 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 $77,600 cash. d. Received cash for the sale of equipment that had cost $68,600, yielding a $4,000 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. IKIBAN, INC. Statement of Cash Flows (Indirect Method) For Year Ended June 30, 2019 Cash flows from operating activities Net income $ 139,510 Adjustments to reconcile net income to net cash provided by operating activities Income statement items not affecting cash Depreciation expense 78,600 Gain on sale of plant assets (4,000) 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 (24,000) 32,700 3,000 (15,000) (11,000) (2,400) $ 197,410 77,600 (77,600) Net cash provided by operating activities Cash flows from investing activities Cash received from sale of equipment Cash paid for equipment Cash paid for dividends 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 0 0 $ 197,410 Net cash used in financing activities Net increase (decrease) in cash Cash balance at prior year-end Cash balance at current year-end $ $ 197,410