The following financial statements and additional information are reported.
| IKIBAN INCORPORATED | ||
| Comparative Balance Sheets | ||
| At June 30 | 2027 | 2026 |
|---|---|---|
| Assets | ||
| Cash | $ 242,600 | $ 134,640 |
| Accounts receivable, net | 122,400 | 59,840 |
| Inventory | 108,800 | 364,960 |
| Prepaid expenses | 6,800 | 14,960 |
| Total current assets | 480,600 | 574,400 |
| Equipment | 190,400 | 248,000 |
| Accumulated depreciation—Equipment | (48,000) | (74,400) |
| Land | 57,000 | 0 |
| Total assets | $ 680,000 | $ 748,000 |
| Liabilities and Equity | ||
| Accounts payable | $ 47,600 | $ 74,800 |
| Wages payable | 13,600 | 29,900 |
| Income taxes payable | 6,800 | 11,200 |
| Total current liabilities | 68,000 | 115,900 |
| Notes payable (long term) | 163,200 | 258,100 |
| Total liabilities | 231,200 | 374,000 |
| Equity | ||
| Common stock, $5 par value | 360,400 | 314,200 |
| Retained earnings | 88,400 | 59,800 |
| Total equity | 448,800 | 374,000 |
| Total liabilities and equity | $ 680,000 | $ 748,000 |
| IKIBAN INCORPORATED | |
| Income Statement | |
| For Year Ended June 30, 2027 | |
| Sales | $ 1,625,900 |
|---|---|
| Cost of goods sold | 1,100,000 |
| Gross profit | 525,900 |
| Operating expenses (excluding depreciation) | 394,400 |
| Depreciation expense | 25,600 |
| 105,900 | |
| Other gains (losses) | |
| Gain on sale of equipment | 1,100 |
| Income before taxes | 107,000 |
| Income taxes expense | 21,400 |
| Net income | $ 85,600 |
Additional Information
- A $94,900 notes payable is retired at its $94,900 carrying (book) value in exchange for cash.
- Declared and paid cash dividends of $57,000.
- Land is acquired for $57,000 cash.
- Received $6,700 cash for the sale of equipment that had cost $57,600, yielding a $1,100 gain.
- Prepaid Expenses and Wages Payable relate to Operating Expenses on the income statement.
- All purchases and sales of inventory are on credit.
- Received $46,200 cash from issuing 18,400 shares of common stock.
Required:
(1) Prepare a statement of cash flows using the indirect method for the year ended June 30, 2027.
Note: Enter amounts to be deducted as negative values.
(2) Compute the company’s cash flow on total assets ratio for its fiscal year 2027.
Solution
(2) Compute the company’s cash flow on total assets ratio for its fiscal year 2027.
