Question

Use the following information for the Problems below.

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Forten Company's current year income statement, comparative balance sheets, and additional information follow. 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.

FORTEN COMPANY Comparative Balance Sheets December 31
	Current Year						Prior Year
Assets
Cash		$	54,400					$	76,500
Accounts receivable			70,310						53,625
Inventory			280,156						254,800
Prepaid expenses			1,280						2,005
Total current assets			406,146						386,930
Equipment			154,500						111,000
Accum. depreciation—Equipment			(38,125	)					(47,500	)
Total assets		$	522,521					$	450,430
Liabilities and Equity
Accounts payable		$	56,141					$	119,175
Short-term notes payable			10,900						6,600
Total current liabilities			67,041						125,775
Long-term notes payable			63,500						51,750
Total liabilities			130,541						177,525
Equity
Common stock, $5 par value			167,250						153,250
Paid-in capital in excess of par, common stock			42,000						0
Retained earnings			182,730						119,655
Total liabilities and equity		$	522,521					$	450,430

  

FORTEN COMPANY Income Statement For Current Year Ended December 31
Sales				$	597,500
Cost of goods sold					288,000
Gross profit					309,500
Operating expenses
Depreciation expense	$	23,750
Other expenses		135,400			159,150
Other gains (losses)
Loss on sale of equipment					(8,125	)
Income before taxes					142,225
Income taxes expense					28,450
Net income				$	113,775

Additional Information on Current Year Transactions

1. The loss on the cash sale of equipment was $8,125 (details in b).
2. Sold equipment costing $55,875, with accumulated depreciation of $33,125, for $14,625 cash.
3. Purchased equipment costing $99,375 by paying $36,000 cash and signing a long-term note payable for the balance.
4. Borrowed $4,300 cash by signing a short-term note payable.
5. Paid $51,625 cash to reduce the long-term notes payable.
6. Issued 2,800 shares of common stock for $20 cash per share.
7. Declared and paid cash dividends of $50,700

Problem 16-5AB Direct: Statement of cash flows LO P5

Required:
Prepare a complete statement of cash flows using the direct method. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1