Question

Required:
Prepare a complete statement of cash flows using a spreadsheet; report its operating activities using the indirect method. (Enter all amounts as positive values.)

Please use the indirect method

Required information

Use the following information for the Problems below.

[The following information applies to the questions displayed below.]

Forten Company, a merchandiser, recently completed its calendar-year 2017 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s income statement and balance sheets follow.

FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016
	2017				2016
Assets
Cash	$	51,400			$	74,500
Accounts receivable		67,310				51,625
Inventory		277,156				252,800
Prepaid expenses		1,300				2,025
Total current assets		397,166				380,950
Equipment		156,500				109,000
Accum. depreciation—Equipment		(37,125	)			(46,500	)
Total assets	$	516,541			$	443,450
Liabilities and Equity
Accounts payable	$	54,141			$	116,175
Short-term notes payable		10,300				6,200
Total current liabilities		64,441				122,375
Long-term notes payable		64,500				49,750
Total liabilities		128,941				172,125
Equity
Common stock, $5 par value		164,750				151,250
Paid-in capital in excess of par, common stock		38,500				0
Retained earnings		184,350				120,075
Total liabilities and equity	$	516,541			$	443,450

  

FORTEN COMPANY Income Statement For Year Ended December 31, 2017
Sales				$	587,500
Cost of goods sold					286,000
Gross profit					301,500
Operating expenses
Depreciation expense	$	21,750
Other expenses		133,400			155,150
Other gains (losses)
Loss on sale of equipment					(6,125	)
Income before taxes					140,225
Income taxes expense					25,650
Net income				$	114,575

Problem 12-4AA Indirect: Cash flows spreadsheet LO P1, P2, P3, P4

Additional Information on Year 2017 Transactions

1. Net income was $114,575.
2. Accounts receivable increased.
3. Inventory increased.
4. Prepaid expenses decreased.
5. Accounts payable decreased.
6. Depreciation expense was $21,750.
7. Sold equipment costing $49,875, with accumulated depreciation of $31,125, for $12,625 cash. This yielded a loss of $6,125.
8. Purchased equipment costing $97,375 by paying $32,000 cash and (i.) by signing a long-term note payable for the balance.
9. Borrowed $4,100 cash by signing a short-term note payable.
10. Paid $50,625 cash to reduce the long-term notes payable.
11. Issued 2,600 shares of common stock for $20 cash per share.
12. Declared and paid cash dividends of $50,300.

FORTEN COMPANY Spreadsheet for Statement of Cash Flows For Year Ended December 31, 2017 Analysis of Changes December 31, 2016 Debit Credit December 31, 2017 Balance sheet—debit Cash $74,500 $51,400 Accounts receivable 51,625 Inventory 252,800 Prepaid expenses 2,025 Equipment 109,000 $489,950 $51,400 Balance sheet—credit Accumulated depreciation—Equipment $46,500 Accounts payable 116,175 Short-term notes payable 6,200 Long-term notes payable 49,750 Common stock, $5 par value 151,250 Paid-in capital in excess of par value, common stock 0 Retained earnings 120,075 $489,950 $0 Statement of cash flows Operating activities Investing activities Financing activities Non cash investing and financing activities Purchase of equipment financed by long-term note payable $0 $0

Answer 1

Solution

Forten company

spreadsheet for statement of cash flows:

	December 31,2016		Debit		Credit	December 31,2017
Balance sheet -debits
Cash	74500					51400
Account receivable	51625	(b)	15685			67310
Inventory	252800	(c)	24356			277156
Prepaid expenses	2025			(d)	725	1300
Equipment	109000	(h)	97375	(g)	49875	156500
	489950					553666
Balance sheet-credits
Accum.depreciation-equipment	46500	(g)	31,125	(f)	21750	37125
Account payable	116175	(e)	62034			54141
Short-term notes payable	6200			(j)	4100	10300
Long-term notes payable	49750	(k)	50625	(i)	65375	64500
Common stock, $5 par value	151250			(l)	13500	164750
Paid in capital in excess of par value, common stock	0			(l)	38500	38500
Retained earnings	120075	(m)	50300	(a)	114575	184350
	489950					553666
Statement of cash flows
Operating activities
Net income		(a)	114575
Increase in account receivable				(b)	15685
Increase in merchandise inventory				(c)	24356
Decrease in prepaid expenses		(d)	725
Decrease in account payable				(e)	62034
Depreciation expense		(f)	21750
Loss on sale of equipment		(g)	6125
Investing activities
Receipt from sale of equipment		(g)	12625
Payment to purchase equipment				(h)	32000
Financing activities:
Borrowed on short term note		(j)	4100
Payment on long term note				(k)	50625
Issued common stock for cash		(l)	52000
Payment of cash dividends				(m)	50300
Noncash investing and financing activities
Purchase of equipment financed by long term note payable		(i)	65375 (97375-32000)	(h)	65375
			608775		608775