Assets Cash $ 57,400 $ 78,500 Accounts receivable 73,320 55,625 Inventory 283,156 256,800 Prepaid expenses 1,260...

Assets
Cash	$	57,400		$	78,500
Accounts receivable		73,320			55,625
Inventory		283,156			256,800
Prepaid expenses		1,260			1,995
Total current assets		415,136			392,920
Equipment		152,500			113,000
Accum. depreciation—Equipment		(39,125	)		(48,500	)
Total assets	$	528,511		$	457,420
Liabilities and Equity
Accounts payable	$	58,141		$	122,175
Short-term notes payable		11,500			7,000
Total current liabilities		69,641			129,175
Long-term notes payable		62,500			53,750
Total liabilities		132,141			182,925
Equity
Common stock, $5 par value		172,750			155,250
Paid-in capital in excess of par, common stock		42,500			0
Retained earnings		181,120			119,245
Total liabilities and equity	$	528,511		$	457,420

FORTEN COMPANY Income Statement For Year Ended December 31, 2017
Sales			$	607,500
Cost of goods sold				290,000
Gross profit				317,500
Operating expenses
Depreciation expense	$	25,750
Other expenses		137,400		163,150
Other gains (losses)
Loss on sale of equipment				(10,125	)
Income before taxes				144,225
Income taxes expense				31,250
Net income			$	112,975

Additional Information on Year 2017 Transactions

The loss on the cash sale of equipment was $10,125 (details in b).
Sold equipment costing $61,875, with accumulated depreciation of $35,125, for $16,625 cash.
Purchased equipment costing $101,375 by paying $40,000 cash and signing a long-term note payable for the balance.
Borrowed $4,500 cash by signing a short-term note payable.
Paid $52,625 cash to reduce the long-term notes payable.
Issued 3,000 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $51,100.

Required:
1. Prepare a complete statement of cash flows; report its operating activities using the indirect method.

Expert Solution

Statement of cash flow :

Cash flow from operating activities
Net income		112975
Adjustment to reconcile net income to cash flow from operating activities
Depreciation expense	25750
Loss on sale of equipment	10125
Increase account receivable	-17695
Increase inventory	-26356
Decrease prepaid expense	735
Decrease account payable	-64034
Increase short term note payable	4500
		-66975
Net cash flow from operating activities		46000
Cash flow from investing activiites
Sale of equipment	16625
Purchase of equipment by paying cash	-40000
Net cash used in investing activities		-23375
Cash flow from financing activities
Reduce long term note payable	-52625
Issue Common Stock	60000
Dividend paid	-51100
Net cash used in financing activities		-43725

Net cash flow		21100
Beginning Cash		78500
Ending Cash		58400

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