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MONTGOMERY INC. Comparative Balance Sheets December 31, 2018 and 2017
		2018				2017
Assets
Cash	$	54,100			$	54,200
Accounts receivable, net		13,400				16,400
Inventory		120,100				94,800
Total current assets		187,600				165,400
Equipment		66,500				56,100
Accum. depreciationEquipment		(30,100	)			(20,700	)
Total assets	$	224,000			$	200,800
Liabilities and Equity
Accounts payable	$	32,000			$	34,400
Salaries payable		600				800
Total current liabilities		32,600				35,200
Equity
Common stock, no par value		159,800				148,200
Retained earnings		31,600				17,400
Total liabilities and equity	$	224,000			$	200,800

MONTGOMERY INC. Income Statement For Year Ended December 31, 2018
Sales				$	60,900
Cost of goods sold					(25,300	)
Gross profit					35,600
Operating expenses
Depreciation expense	$	9,400
Other expenses		7,500
Total operating expense					16,900
Income before taxes					18,700
Income tax expense					4,500
Net income				$	14,200

Additional Information

No dividends are declared or paid in 2018.

Issued additional stock for $11,600 cash in 2018.

Purchased equipment for cash in 2018; no equipment was sold in 2018.

1. Use the above financial statements and additional information to prepare a statement of cash flows for the year ended December 31, 2018, using the indirect method. (Amounts to be deducted should be indicated by a minus sign.)

MONTGOMERY, INC. Statement of Cash Flows (Indirect Method) For Year Ended December 31, 2018 Cash flows from operating activities Adjustments to reconcile net income to net cash provided by operations: Changes in current operating assets and liabilities $0 Cash flows from investing activities 0 Cash flows from financing activities 0 $0 Cash balance at beginning of year Cash balance at end of year $0

The following transactions and events occurred during the year. Assuming that this company uses the indirect method to report cash provided by operating activities, indicate where each item would appear on its statement of cash flows by placing an X in the appropriate column(s). (More than one column may be used.)

Statement of Cash Flows Noncash Investing & Financing Activities Not Reported on Statement or in Notes Operating Activities Investing Activities Financing Activities a. Declared and paid a cash dividend b. Recorded depreciation expense c. Paid cash to settle long-term note payable d. Prepaid expenses increased in the year e. Accounts receivable decreased in the year f. Purchased land by issuing common stock g. Inventory increased in the year h. Sold equipment for cash, yielding a loss i. Accounts payable decreased in the year j. Income taxes payable increased in the year

The following financial statements and additional information are reported.

IKIBAN INC. Comparative Balance Sheets June 30, 2017 and 2016
	2017				2016
Assets
Cash	$	105,100			$	48,000
Accounts receivable, net		71,000				55,000
Inventory		67,800				92,500
Prepaid expenses		4,800				6,200
Total current assets		248,700				201,700
Equipment		128,000				119,000
Accum. depreciationEquipment		(29,000	)			(11,000	)
Total assets	$	347,700			$	309,700
Liabilities and Equity
Accounts payable	$	29,000			$	36,000
Wages payable		6,400				15,800
Income taxes payable		3,800				4,600
Total current liabilities		39,200				56,400
Notes payable (long term)		34,000				64,000
Total liabilities		73,200				120,400
Equity
Common stock, $5 par value		228,000				164,000
Retained earnings		46,500				25,300
Total liabilities and equity	$	347,700			$	309,700

IKIBAN INC. Income Statement For Year Ended June 30, 2017
Sales				$	698,000
Cost of goods sold					415,000
Gross profit					283,000
Operating expenses
Depreciation expense	$	62,600
Other expenses		71,000
Total operating expenses					133,600
					149,400
Other gains (losses)
Gain on sale of equipment					2,400
Income before taxes					151,800
Income taxes expense					44,290
Net income				$	107,510

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 $61,600 cash.

Received cash for the sale of equipment that had cost $52,600, yielding a $2,400 gain.

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

All purchases and sales of inventory are on credit.

rev: 12_05_2017_QC_CS-111198

Exercise 12-11 Part 1

Required:

(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.)

IKIBAN, INC. Statement of Cash Flows (Indirect Method) For Year Ended June 30, 2017 Cash flows from operating activities Adjustments to reconcile net income to net cash provided by operating activities Income statement items not affecting cash Changes in current operating assets and liabilities $0 Cash flows from investing activities 0 Cash flows from financing activities 0 Net increase (decrease) in cash $0 Cash balance at prior year-end Cash balance at current year-end $0

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