Use the following financial statements and additional information to (1) prepare a statement of cash flows for the year ended June 30, 2011, using the indirect method, and (2) compute the company’s cash flow on total assets ratio for its fiscal year 2011.
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GECKO INC. Comparative Balance Sheets June 30,2011 and 2010 |
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|
|
2011 |
2010 |
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Assets |
|
|
|
Cash |
$ 85,800 |
$ 45,000 |
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Accounts receivable, net |
70,000 |
52,000 |
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Inventory |
66,800 |
96,800 |
|
Prepaid expenses |
5,400 |
5,200 |
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Equipment |
130,000 |
120,000 |
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Accumdepreciation—Equipment |
(28,000) |
(10,000) |
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Total assets |
$330,000 |
$309,000 |
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Liabilities and Equity |
|
|
|
Accounts payable |
$ 26,000 |
$ 32,000 |
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Wages payable |
7,000 |
16,000 |
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Income taxes payable |
2,400 |
3,600 |
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Notes payable (long term) |
40,000 |
70,000 |
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Common stock, $5 par value |
230,000 |
180,000 |
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Retained earnings |
24,600 |
7,400 |
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Total liabilities and equity |
$330,000 |
$309,000 |
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GECKO INC. Income Statement For Year Ended June 30,2011 |
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Sales |
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$668,000 |
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Cost of goods sold |
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412,000 |
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Gross profit |
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256,000 |
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Operating expenses |
|
|
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Depreciation expense |
$58,600 |
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|
Other expenses |
67,000 |
|
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Total operating expenses |
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125,600 |
|
|
|
130,400 |
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Other gains (losses) |
|
|
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Gain on sale of equipment |
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2,000 |
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Income before taxes |
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132,400 |
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Income taxes expense |
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45,640 |
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Net income |
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$ 86,760 |
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 $58,600 cash.
d. Received cash for the sale of equipment that had cost $48,600, yielding a $2,000 gain.
e. Prepaid Expenses and Wages Payable relate to Other Expenses on the income statement.
f. All purchases and sales of merchandise inventory are on credit.