Use the following financial statements and additional information.

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.

Using the income statement, the comparative balance sheet, and the additional information given above, reconstruct the entries for the summarized activity of the current fiscal year. Upon completion, the trial balance tab should agree with the June 30, 2017 balances.

1. Reconstruct the journal entry for cash receipts from customers, incorporating the change in the related balance sheet account(s), if any.

Cash DR 664,000

Account Receivable DR 14,000

Sales CR 678,000

2. Reconstruct the journal entry for cash payments for inventory, incorporating the change in the related balance sheet account(s), if any.

3. Reconstruct the journal entry for depreciation expense, incorporating the change in the related balance sheet account(s), if any.

4. Reconstruct the journal entry for cash paid for operating expenses, incorporating the change in the related balance sheet account(s), if any.

5. Reconstruct the journal entry for the sale of equipment at a gain, incorporating the change in the related balance sheet account(s), if any.

6. Reconstruct the journal entry for income taxes expense, incorporating the change in the related balance sheet account(s), if any.

7. Reconstruct the entry to record the retirement of the $30,000 note payable at its $30,000 carrying (book) value in exchange for cash.

8. Reconstruct the entry for the purchase of new equipment.

9. Reconstruct the entry for the issuance of common stock.

10. Close all revenue and gain accounts to income summary.

11. Close all expense accounts to income summary.

12. Close Income Summary to Retained Earnings.

13. Reconstruct the journal entry for cash dividends paid.

Prepare the Statement of Cash flows for the year ended June 30, 2017 using the Direct Method. Hint Use the Cash T-account on the General Ledger tab to identify the sources and uses of cash. List cash outflows as negative values.

Prepare the operating activities section of the statement of cash flows using the indirect method. Enter reductions to net cash provided by operating activities as negative values.

2016 IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016 2017 Assets Cash $ 87,500 Accounts receivable, net 65,000 Inventory 63,800 Prepaid expenses 4,400 Total current assets 220,700 Equipment 124,000 Accum. depreciation-Equipment (27,000) Total assets $317,700 Liabilities and Equity Accounts payable $ 25,000 Wages payable 6,000 Income taxes payable 3,400 Total current liabilities 34,400 Notes payable (long term) 30,000 Total liabilities 64,400 Equity Common stock, $5 par value 220,000 Retained earnings 33,300 Total liabilities and equity $317,700 $ 44,000 51,000 86,500 5,400 186,900 115,000 (9,000) $ 292,900 $ 30,000 15,000 3,800 48,800 60,000 108,800 160,000 24,100 $ 292,900 IKIBAN INC. Income Statement For Year Ended June 30, 2017 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $58,600 Other expenses 67,000 Total operating expenses $678,000 411,000 267,000 125,600 141,400 Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense 2,000 143,400 43,890 $ 99,510 Net income IKIBAN INC. Statement of Cash Flows (Direct Method) For Year Ended June 30, 2017 Cash flows from operating activities: Cash received from customers $ 664,000 Cash paid for merchandise (393,300) Cash paid for operating expenses (75,000) Cash paid for income taxes (44,290) $ 151,410 Net cash provided by operating activities Cash flows from investing activities: Cash received from sale of equipment Cash paid for equipment 10,000 (57,600) (47,600) Net cash used by investing activities Cash flows from financing activities: Cash received from stock issuance Cash paid to retire notes Cash paid for dividends 60,000 (30,000) (90,310) $ Net cash used by financing activities Net increase in cash Cash balance at prior year-end Cash balance at current year-end (60,310) 43,500 44,000 87,500 $ 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: Depreciation expense $ 58,600 Gain on sale of equipment (2,000) 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) 51,900 151,410 $ Net cash provided by operating activities, using the direct method: $ 151,410 Congratulations! You have successfully reconciled the two methods