In: Accounting
Use the following information for the Problems 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 | $ | 60,400 | $ | 80,500 | |||
Accounts receivable | 76,340 | 57,625 | |||||
Inventory | 286,156 | 258,800 | |||||
Prepaid expenses | 1,280 | 2,035 | |||||
Total current assets | 424,176 | 398,960 | |||||
Equipment | 150,500 | 115,000 | |||||
Accum. depreciation—Equipment | (40,125 | ) | (49,500 | ) | |||
Total assets | $ | 534,551 | $ | 464,460 | |||
Liabilities and Equity | |||||||
Accounts payable | $ | 60,141 | $ | 125,175 | |||
Short-term notes payable | 12,100 | 7,400 | |||||
Total current liabilities | 72,241 | 132,575 | |||||
Long-term notes payable | 61,500 | 55,750 | |||||
Total liabilities | 133,741 | 188,325 | |||||
Equity | |||||||
Common stock, $5 par value | 176,750 | 157,250 | |||||
Paid-in capital in excess of par, common stock | 44,500 | 0 | |||||
Retained earnings | 179,560 | 118,885 | |||||
Total liabilities and equity | $ | 534,551 | $ | 464,460 | |||
FORTEN COMPANY Income Statement For Year Ended December 31, 2017 |
||||||
Sales | $ | 617,500 | ||||
Cost of goods sold | 292,000 | |||||
Gross profit | 325,500 | |||||
Operating expenses | ||||||
Depreciation expense | $ | 27,750 | ||||
Other expenses | 139,400 | 167,150 | ||||
Other gains (losses) | ||||||
Loss on sale of equipment | (12,125 | ) | ||||
Income before taxes | 146,225 | |||||
Income taxes expense | 34,050 | |||||
Net income | $ | 112,175 | ||||
Additional Information on Year 2017
Transactions
The loss on the cash sale of equipment was $12,125 (details in b).
Sold equipment costing $67,875, with accumulated depreciation of $37,125, for $18,625 cash.
Purchased equipment costing $103,375 by paying $44,000 cash and signing a long-term note payable for the balance.
Borrowed $4,700 cash by signing a short-term note payable.
Paid $53,625 cash to reduce the long-term notes payable.
Issued 3,200 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $51,500.
Problem 16-5AB Direct: Statement of cash flows LO P1, P3, P5
Required:
Prepare a complete statement of cash flows; report its operating
activities according to the direct method.
Cash flow Statement: | |||||||
Cash flows from Operating activities: | |||||||
Cash received from Accounts receivable (617500+57625-76340) | 598785 | ||||||
Cash paid to suppliers (292000+286156-258800+125175-60141) | -384390 | ||||||
cash paid for expense (139400+1280-2035) | -138645 | ||||||
Income tax expense paid | -34050 | ||||||
Nnet cash provided from Operatin activities | 41700 | ||||||
Cash flows from Investing activities: | |||||||
Sale of Eqquipment | 18625 | ||||||
Purchase of equipment | -44000 | ||||||
Net cash used in Investing activities | -25375 | ||||||
Cash flows from Financing activities: | |||||||
Borrowing from Short term notes payable | 4700 | ||||||
Repayment of Long term notes payable | -53625 | ||||||
Common Stock issued (3200 shares @20) | 64000 | ||||||
Dividend paid | -51500 | ||||||
Net cash used in financing activities | -36425 | ||||||
Net decrease in cash | -20100 | ||||||
Beginning Balance in cash | 80500 | ||||||
Ending Balance in cash | 60400 |