The following financial statements and additional information are reported. Addi
ID: 2333804 • Letter: T
Question
The following financial statements and additional information are reported.
Additional Information
A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash.
The only changes affecting retained earnings are net income and cash dividends paid.
New equipment is acquired for $57,600 cash.
Received cash for the sale of equipment that had cost $48,600, yielding a $2,000 gain.
Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
All purchases and sales of inventory are on credit.
Using the direct method, prepare the statement of cash flows for the year ended June 30, 2017.
IKIBAN INC.Comparative Balance Sheets
June 30, 2017 and 2016 2017 2016 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. depreciation—Equipment (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
Explanation / Answer
IKIBAN Cor.
Statement of cash flows
For the year ending June 30, 2017
For the year ended March 31 ,……..
Particulars
I. Cash flow from Operating Activities
Net income
99,510
Add: Provision for tax made
43,890
Add: Non-cash and non-operating expenses and losses:
Depreciation expense
58,600
Operating profit before working capital changes
200,000
Add: Decrease in current assets
Less: Decrease in current liabilities
Less: Increase in current assets
Cash generated from operations
195,700
Less: Tax paid
- 44,290
Net cash generated from Operating Activities
151,410
II. Cash flow from Investing Activities
Sale of equipment
10,000
Purchase of equipment
- 57,600
Net cash used in Investing Activities
- 47,600
III. Cash flow from Financing Activities
Issue of common stock
60,000
Cash paid for notes payable
- 30,000
Cash dividend paid
- 90,310
Net cash used in Financing Activities
- 60,310
Net increase in Cash and Cash Equivalents(I +II +III)
43,500
Add: Cash and cash equivalents in the beginning of the period
44,000
Cash and cash equivalents at the end of the period
87,500
Working notes:
Equipment Account
Accumulated Depreciation Account
Income tax payable account
Calculation of cash dividend paid
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Particulars
I. Cash flow from Operating Activities
Net income
99,510
Add: Provision for tax made
43,890
Add: Non-cash and non-operating expenses and losses:
Depreciation expense
58,600
Less: Gain on sale of equipment -2,000Operating profit before working capital changes
200,000
Add: Decrease in current assets
Inventory 22,700 Prepaid expenses 1,000Less: Decrease in current liabilities
Accounts payable - 5,000 Wages payable - 9,000Less: Increase in current assets
Accounts receivable - 14,000Cash generated from operations
195,700
Less: Tax paid
- 44,290
Net cash generated from Operating Activities
151,410
II. Cash flow from Investing Activities
Sale of equipment
10,000
Purchase of equipment
- 57,600
Net cash used in Investing Activities
- 47,600
III. Cash flow from Financing Activities
Issue of common stock
60,000
Cash paid for notes payable
- 30,000
Cash dividend paid
- 90,310
Net cash used in Financing Activities
- 60,310
Net increase in Cash and Cash Equivalents(I +II +III)
43,500
Add: Cash and cash equivalents in the beginning of the period
44,000
Cash and cash equivalents at the end of the period
87,500
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