Question

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 $67,600 cash. Received cash for the sale of equipment that had cost $58,600, yielding a $3,000 gain. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. All purchases and sales of inventory are on credit. 1) Prepare a statement of cash flows for the year ended June 30, 2017, using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Answer:

                               Ikiban Inc.

                     Statement of Cash flows

               For the Year Ended June 30, 2017

Cash flow from operating activities:

Net income                                                               $117,510

Adjustments to net income:

• Depreciation expense $67,600
• Decrease in inventory $27,200
• Decrease in prepaid expenses $1,900
• Increase in accounts receivable ($18,500)
• Gain from sale of equipment ($3,000)
• Decrease in accounts payable ($9,500)
• Decrease in wages payable ($9,900)
• Decrease in taxes payable ($2,800)             $53,000

Net cash flow from operating activities                 $170,510

Cash flow from investing activities:

Purchase of new equipment                                 ($67,600)

Disposal of old equipment                                     $13,500

Net cash flow from investing activities                 ($54,100)

Cash flow from financing activities:

Issuance of common stock                                   $69,000

Retirement of note payable                                 ($30,000)

Distributed dividends                                           ($106,310)

Net cash flow from financing activities                 ($67,310)

Net cash increase                                                   $49,100

Cash balance June 30, 2016                                 $53,000

Cash balance June 30, 2017                                 $102,100