[The following information applies to the questions displayed below.] The follow

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[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, 2017 and 2016 2017 2016 Assets Cash Accounts receivable, net Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets $95,500 64,000 71,000 116,500 9.400 260,900 135,000 95,000 83,800 6,400 280,700 144,000 (37,000) (19,000 $387,700 376,900 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 45,000 60,000 19,000 7,800 86,800 50,00080,000 8,000 5.400 58,400 108,400 166,800 260,000 180,000 19,30030,100 $387,700 376,900 Total liabilities and equity

Explanation / Answer

Ikiban Inc

Statement of cash flows (indirect method):

Ikiban Inc

Statement of cash flows (Indirect method)

for the year ended June 30, 2017

Cash flows from operating activities:

Net Income

$139,510

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense

$78,600

Gain on sale of equipment

($4,000)

increase in accounts receivable

($24,000)

Decrease in inventory

$32,700

Decrease in prepaid expenses

$3,000

Decrease in accounts payable

($15,000)

Decrease in wages payable

($11,000)

Decrease in income tax

($2,400)

$57,900

Cash flow from operating activities

$197,410

Cash flow from investing activities:

Purchase of equipment

($77,600)

Proceeds from sale of equipment

$12,000

Cash flow from investing activities

($65,600)

Cash flow from financing activities:

Issue of common stock

$80,000

Dividends paid

($150,310)

Notes payable retired

($30,000)

Cash flow from financing activities

($100,310)

Excess of cash

$31,500

Beginning cash balance

$64,000

Ending cash balance

$95,500

Computations:

Beginning balance of equipment$135,000

Add: Purchases$77,600

Less: Ending balance ($144,000)

Cost of equipment sold$68,600

Accumulated depreciation – beginning balance$19,000

Add: Depreciation expense $78,600

Less: ending balance $37,000

Accumulated balance of equipment sold$60,600

Cost of equipment sold $68,600

Less: accumulated depreciation($60,600)

Book value of equipment sold$8,000

Gain on sale of equipment$4,000

Sales proceeds of equipment$12,000

Retained earnings – beginning balance $30,100

Add: net income$139,510

Less: ending balance$19,300

Cash dividends paid$150,310

Ikiban Inc

Statement of cash flows (Indirect method)

for the year ended June 30, 2017

Cash flows from operating activities:

Net Income

$139,510

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense

$78,600

Gain on sale of equipment

($4,000)

increase in accounts receivable

($24,000)

Decrease in inventory

$32,700

Decrease in prepaid expenses

$3,000

Decrease in accounts payable

($15,000)

Decrease in wages payable

($11,000)

Decrease in income tax

($2,400)

$57,900

Cash flow from operating activities

$197,410

Cash flow from investing activities:

Purchase of equipment

($77,600)

Proceeds from sale of equipment

$12,000

Cash flow from investing activities

($65,600)

Cash flow from financing activities:

Issue of common stock

$80,000

Dividends paid

($150,310)

Notes payable retired

($30,000)

Cash flow from financing activities

($100,310)

Excess of cash

$31,500

Beginning cash balance

$64,000

Ending cash balance

$95,500

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