Required information [The following information applies to the questions display
ID: 2534350 • Letter: R
Question
Required information
[The following information applies to the questions displayed below.]
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 $61,600 cash.
Received cash for the sale of equipment that had cost $52,600, yielding a $2,400 gain.
Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
All purchases and sales of inventory are on credit.
rev: 06_20_2017_QC_CS-91585, 12_05_2017_QC_CS-111198
Using the direct method, prepare the statement of cash flows for the year ended June 30, 2017. (Amounts to be deducted should be indicated with a minus sign.)
IKIBAN INC.Comparative Balance Sheets
June 30, 2017 and 2016 2017 2016 Assets Cash $ 105,100 $ 48,000 Accounts receivable, net 71,000 55,000 Inventory 67,800 92,500 Prepaid expenses 4,800 6,200 Total current assets 248,700 201,700 Equipment 128,000 119,000 Accum. depreciation—Equipment (29,000 ) (11,000 ) Total assets $ 347,700 $ 309,700 Liabilities and Equity Accounts payable $ 29,000 $ 36,000 Wages payable 6,400 15,800 Income taxes payable 3,800 4,600 Total current liabilities 39,200 56,400 Notes payable (long term) 34,000 64,000 Total liabilities 73,200 120,400 Equity Common stock, $5 par value 228,000 164,000 Retained earnings 46,500 25,300 Total liabilities and equity $ 347,700 $ 309,700
Explanation / Answer
Solution:
IKIBAN INC
Cash Flow Statement (Direct Method)
For the Year Ended June 30, 2017
Cash Flow from Operating Activities:
$$
$$
+
Cash Received from Customers (Note 1)
$682,000
-
Cash paid for purchases of inventory (Note 2)
-$397,300
-
Cash paid for other operating expense (Note 3)
-$79,000
-
Cash Paid for Income Taxes (refer Note 5)
-$45,090
Net Cash Provided by Operative Activities
$160,610
Cash Flow from Investing Activities:
-
Purchase of Equipment
-$61,600
+
Sale of Equipment (Refer Note 6)
$10,400
Net Cash used by Investing Activities
-$51,200
Cash Flow from Financing Activities:
-
Repayment of Loan
-$30,000
+
Proceeds from Issuance of Common Stock (228,000 - 164,000)
$64,000
-
Cash Dividend Paid (25300 + net income 107510 - Ending 46500)
-$86,310
Net Cash used by Financing Activities
-$52,310
Net Increase/(Decrease) in Cash and Cash Equivalents
$57,100
Cash and Cash Equivalents at the beginning of the year
$48,000
Cash and Cash Equivalents at the end of the year
$105,100
Note 1 -- Cash receipts from Customers
Beginning Accounts Receivable
$55,000
Plus: Credit Sales made during the year
$698,000
Less: Ending Accounts Receivable
-$71,000
Cash Collected from Customers
$682,000
Note 2 -- Cash payment for merchandise
Beginning Accounts Payable
$36,000
Plus: Purchases made during the year (refer note 3)
$390,300
Less: Ending Accounts Payable
-$29,000
Cash Paid to Supplier during the year
$397,300
Note 3 -- Purchase made during the year
Cost of Goods Sold
$415,000
Plus: Ending Inventory
$67,800
Less: Beginning Inventory
-$92,500
Purchases made during the year
$390,300
Note 4 -- Cash paid for Wages and other operating expenses
Beginning Wages Payable
$15,800
Ending Prepaid Expense
$4,800
Add: Other Operating Expense
$71,000
Less: beg. Prepaid expense
-$6,200
Less: Ending Wages Payable
-$6,400
Cash Paid for Operating Expense
$79,000
Note 5 --
Income Taxes
Cash Paid (Bal Fig)
45090
Beg. Bal
4600
Ending Bal
3800
Income tax Expense (Refer Income statement)
44290
48890
48890
Note 6 – Cash received from sale of equipment
Equipment
beg. Bal
119000
Cost of Equipment Sold
52600
Purchase
61600
Ending Bal
128000
180600
180600
Accumulated Depreciation
Depreciation related to Equipment Sold (bal fig)
44600
beg Bal
11000
Ending Bal
29000
Depreciation Expense (refer Income statement)
62600
73600
73600
Cost of Equipment Sold = $52,600
Less: Accumulated Depreciation = ($44,600)
Book Value of Equipment Sold = 52600 – 44600 = $8,000
Cash Received from Sale of Equipment = Book Value + Gain on Sale = 8,000 + 2400 = $10,400
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IKIBAN INC
Cash Flow Statement (Direct Method)
For the Year Ended June 30, 2017
Cash Flow from Operating Activities:
$$
$$
+
Cash Received from Customers (Note 1)
$682,000
-
Cash paid for purchases of inventory (Note 2)
-$397,300
-
Cash paid for other operating expense (Note 3)
-$79,000
-
Cash Paid for Income Taxes (refer Note 5)
-$45,090
Net Cash Provided by Operative Activities
$160,610
Cash Flow from Investing Activities:
-
Purchase of Equipment
-$61,600
+
Sale of Equipment (Refer Note 6)
$10,400
Net Cash used by Investing Activities
-$51,200
Cash Flow from Financing Activities:
-
Repayment of Loan
-$30,000
+
Proceeds from Issuance of Common Stock (228,000 - 164,000)
$64,000
-
Cash Dividend Paid (25300 + net income 107510 - Ending 46500)
-$86,310
Net Cash used by Financing Activities
-$52,310
Net Increase/(Decrease) in Cash and Cash Equivalents
$57,100
Cash and Cash Equivalents at the beginning of the year
$48,000
Cash and Cash Equivalents at the end of the year
$105,100
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