Required information Exercise 16-11 Indirect: Preparing statement of cash flows LO P1, P2, P3, A1 [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 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 2017 2016 $103,300 $ 51,000 75,500 58,000 70,800 97,000 5,100 6,800 254,700 212,800 131,000 122,000 (30,500) (12,500) $355,200 $322,300 $ 32,000 6,700 $ 40,500 16,400 4,100 5,200 42,800 62,100 37,000 67,000 79,800 129,100 Common stock, $5 par value 234,000 167,000 Retained earnings 41,400 26,200 Total liabilities and equity $355,200 $322,300 IKIBAN INC. Income Statement For Year Ended June 30, 2017 Sales $713,000 Cost of goods sold 418,000 Gross profit Operating expenses 295,000 Depreciation expense $65,600 Other expenses 74,000 Total operating expenses 139,600 155,400 Other gains (losses) Gain on sale of equipment Income before taxes Income taxes expense 2,700 158,100 44,590 Net income $113,510 Additional Information a. A $30,000 note payable is retired at its $30,000 carrying (book) value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New equipment is acquired for $64,600 cash. d. Received cash for the sale of equipment that had cost $55,600, yielding a $2,700 gain. e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement. f. All purchases and sales of inventory are on credit. Cash flows from operating activities Net income $ 113,510 Adjustments to reconcile net income to net cash provided by operating activities Income statement items not affecting cash Depreciation expense Gain on sale of plant assets Changes in current operating assets and liabilities Increase in accounts receivable Decrease in inventory Decrease in prepaid expenses Decrease in accounts payable Decrease in wages payable Decrease in income taxes payable Net cash provided by operating activities 65,600 (2,700) (17,500) 26,200 1,700 (8,500) (9,700) (1,100) $ 167,510 Cash flows from investing activities Cash received from sale of equipment 10,700 Cash paid for equipment (64,600) Net cash used in investing activities Cash flows from financing activities Cash received from stock issuance (53,900) 67,000 Cash paid to retire notes (30,000) 98,110 Cash paid for dividends Net cash used in financing activities Net increase (decrease) in cash Cash balance at prior year-end Cash balance at current year-end 135,110 $ 248,720 51,000 $ 299,720