2 HW (15 pts) June 30, 2017 and 2016 3 of 3 Cash S 97,50044,000 51,000 86,500 5,
ID: 2586478 • Letter: 2
Question
2 HW (15 pts) June 30, 2017 and 2016 3 of 3 Cash S 97,50044,000 51,000 86,500 5, 400 65,000 63, 800 4, 400 220,700 124, 000 Inventory Prepaid expenses Equipment 115,000 27,000)(9,000) $317,700 $292,900 Liabilities and Equity Accounts payable Magos payable Income taxes payable Total current liabilities Notes payable (long term) Total 1liabilities Equity Common stock, $S par value Retained earnings Total liabilities and equity s 25,000 30,000 6,000 15,000 3,800 4B,800 3, 400 34, 400 30-00060,000 64, 400108, 800 220,000 160,000 24,100 $317, 700 $292,900 33, 300 Incone Statement Sales Cost of gooda sold Gross profit operating oxpenses $678,000 411,000 267,000 Depreciation expense Other expenses $58, 600 67,000 K PrevExplanation / Answer
Solution:
Part 1 – Cash Flow Statement
IKIBAN INC.
Statement of Cash Flow (Indirect Method)
For the Year Ended June 30, 2017
Cash Flow from Operating Activities:
$$
$$
Net Income
$99,510
Adjustments to reconcile Net Income to net cash provided by operating activities
Income Statement Items not affecting cash
+
Depreciation Expenses (Non cash item)
$58,600
-
Gain on sale of plant assets
-$2,000
+
Income Tax Expenses (Separate treatment)
$43,890
Changes in current operating assets and liabilities
-
Increase in Accounts Receivable, net (65,000 - 51,000)
-$14,000
-
Decrease in Inventory (86,500 - 63,800)
$22,700
+
Decrease in Prepaid Expenses (5400 - 4400)
$1,000
-
Decrease in Accounts Payable (30,000 - 25000)
-$5,000
-
Decrease in Wages Payable (15,000- 6000)
-$9,000
Cash generation from operations
$195,700
-
Cash payment for Income Tax (Refer Note 1)
-$44,290
Net Cash generated from Operative Activities
$151,410
Cash Flow from Investing Activities:
-
Cash payment for Purchase of Machinery
-$57,600
+
Cash received from sale of equipment(Note 2)
$10,000
Net Cash used by Investing Activities
-$47,600
Cash Flow from Financing Activities:
+
Cash received from issuance of Common Stock (220,000 - 160,000)
$60,000
-
Cash paid for Notes Payable
-$30,000
-
Dividend Paid (Retained Earnings 24,100 + Net Income 99,510 - Ending Retained Earnings 33,300)
-$90,310
Net Cash used by Financing Activities
-$60,310
Net Increase/(Decrease) in Cash
$43,500
Cash at the beginning of the year
$44,000
Cash at the end of the year
$87,500
Note 1 --- Income Tax Expenses
Beg. Bal
3800
Income Tax Paid
44290
Income Tax Expense recorded (Income statement)
43890
Ending Bal
3400
47690
47690
Note 2 --- Equipment
Debit
Credit
Beg. Bal
115000
Asset Disposal A/c (Cost of Equipment Sold)
48600
New Purchase
57600
Ending Bal
124000
172600
172600
Accumulated Depreciation
Debit
Credit
Asset Disposal A/c (Accumulated Depreciation of Equipment Sold)
40600
Beg. Bal
9000
Ending Bal
27000
Depreciation Expense (Income Statement)
58600
67600
67600
Asset Disposal Account
Equipment (at cost)
48600
Accumulated Depreciation
40600
Gain on Sale of Equipment (Income Statement)
2000
Cash (Equipment Sold)
10000
50600
50600
Part 2 – Cash Flow on Total Assets Ratio
Numerator
/
Denominator
=
Ratio
Cash Flow from operation
/
Total Assets
=
Cash flow to total asset ratio
195700
/
317700
=
0.62
Or
Numerator
/
Denominator
=
Ratio
Cash Flow from Operating Activities
/
Total Assets
=
Cash flow to total asset ratio
$151,410
/
317700
=
0.48
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IKIBAN INC.
Statement of Cash Flow (Indirect Method)
For the Year Ended June 30, 2017
Cash Flow from Operating Activities:
$$
$$
Net Income
$99,510
Adjustments to reconcile Net Income to net cash provided by operating activities
Income Statement Items not affecting cash
+
Depreciation Expenses (Non cash item)
$58,600
-
Gain on sale of plant assets
-$2,000
+
Income Tax Expenses (Separate treatment)
$43,890
Changes in current operating assets and liabilities
-
Increase in Accounts Receivable, net (65,000 - 51,000)
-$14,000
-
Decrease in Inventory (86,500 - 63,800)
$22,700
+
Decrease in Prepaid Expenses (5400 - 4400)
$1,000
-
Decrease in Accounts Payable (30,000 - 25000)
-$5,000
-
Decrease in Wages Payable (15,000- 6000)
-$9,000
Cash generation from operations
$195,700
-
Cash payment for Income Tax (Refer Note 1)
-$44,290
Net Cash generated from Operative Activities
$151,410
Cash Flow from Investing Activities:
-
Cash payment for Purchase of Machinery
-$57,600
+
Cash received from sale of equipment(Note 2)
$10,000
Net Cash used by Investing Activities
-$47,600
Cash Flow from Financing Activities:
+
Cash received from issuance of Common Stock (220,000 - 160,000)
$60,000
-
Cash paid for Notes Payable
-$30,000
-
Dividend Paid (Retained Earnings 24,100 + Net Income 99,510 - Ending Retained Earnings 33,300)
-$90,310
Net Cash used by Financing Activities
-$60,310
Net Increase/(Decrease) in Cash
$43,500
Cash at the beginning of the year
$44,000
Cash at the end of the year
$87,500
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