Additional Information A $30,000 note payable is retired at its $30,000 carrying

Question

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 $81,600 cash.

Received cash for the sale of equipment that had cost $72,600, yielding a $4,400 gain.

Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.

All purchases and sales of inventory are on credit.

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 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 $ 73,100 68,000 75,000 122,500 10,200 275,700 139,000 21,000 377,700 393,700 101, 000 87,800 6,800 268,700 148,000 39,000 5 49,000 66,000 19,800 8,600 94,400 84,000 178,400 8,400 5,800 63,200 54,000 117,200 184,000 31,300 377,700 393,700 268,000 7,500 IKIBAN INC Income Statement For Year Ended June 30, 2017 Sales Cost of goods sold Gross profit Operating expenses $798,000 435,000 363,000 Depreciation expense Other expenses $82,600 91,000 173,600 189,400 Total operating expenses Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense Net income 4,400 193,800 46,290 $147,510 Additional Information

Explanation / Answer

in given question assets and liabilities not matching for the year 2017. always assets should match with liabilities. but in this case showing a difference of USD 15,000. calculations are given below. so this difference reflecting in cashflows also.

IKIBAN INC Cash Flow Statement For year ended 31 December 2017 Cash flows from operating activities Net Income $   147,510 Adjustment to reconcile net income to: Depreciation expense $      82,600 Gain on sale of equipment $      (4,400) Increase in accounts receivable $   (26,000) Decrease in inventory $      34,700 Decrease in prepaid rent $        3,400 Decrease in accounts payable $   (17,000) Decrease in wages payable $   (11,400) Decrease in Income tax payable $      (2,800) $      59,100 Net cash provided by operating activities $   206,610 Cash flows from investing activities Proceeds from sale of equipment $      12,400 ($72,600-($21,000+$82,600-$39,000)+$4,400) Purchase of equipment $   (81,600) Net cash used by investing activities $   (69,200) Cash flows from financing activities Cash received from stock issuance $      84,000 Repayment of note payable $   (30,000) Dividend paid $ (171,310) $7,500-$31,300-$147,510 Net cash provided by financing activities $ (117,310) Net increase in cash and cash equivalents $      20,100 Cash and cash equivalents at beginning of period $      68,000 Cash and cash equivalents at end of period $      88,100

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