Question

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 $ 55,900 $ 77,500 Accounts receivable 71,810 54,625 Inventory 281,656 255,800 Prepaid expenses 1,250 1,975 Total current assets 410,616 389,900 Equipment 153,500 112,000 Accum. depreciation—Equipment (38,625 ) (48,000 ) Total assets $ 525,491 $ 453,900 Liabilities and Equity Accounts payable $ 57,141 $ 120,675 Short-term notes payable 11,200 6,800 Total current liabilities 68,341 127,475 Long-term notes payable 63,000 52,750 Total liabilities 131,341 180,225 Equity Common stock, $5 par value 170,750 154,250 Paid-in capital in excess of par, common stock 41,500 0 Retained earnings 181,900 119,425 Total liabilities and equity $ 525,491 $ 453,900    FORTEN COMPANY Income Statement For Year Ended December 31, 2017 Sales $ 602,500 Cost of goods sold 289,000 Gross profit 313,500 Operating expenses Depreciation expense $ 24,750 Other expenses 136,400 161,150 Other gains (losses) Loss on sale of equipment (9,125 ) Income before taxes 143,225 Income taxes expense 29,850 Net income $ 113,375 Problem 12-3A Indirect: Statement of cash flows LO A1, P1, P2, P3 Additional Information on Year 2017 Transactions The loss on the cash sale of equipment was $9,125 (details in b). Sold equipment costing $58,875, with accumulated depreciation of $34,125, for $15,625 cash. Purchased equipment costing $100,375 by paying $38,000 cash and signing a long-term note payable for the balance. Borrowed $4,400 cash by signing a short-term note payable. Paid $52,125 cash to reduce the long-term notes payable. Issued 2,900 shares of common stock for $20 cash per share. Declared and paid cash dividends of $50,900. Required: 1. Prepare a complete statement of cash flows; report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign.)

FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2017 Cash flows from operating activities Net income $113,375 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 24,750 Accounts receivable increase (17,185) Inventory increase (25,856) Prepaid expense decrease 725 Accounts payable decrease (63,534) Loss on disposal of equipment 9,125 Net cash provided by operating activities $41,400 Cash flows from investing activities Cash paid for equipment (38,000) Cash received from sale of equipment Net cash used in investing activities (38,000) Cash flows from financing activities: Cash borrowed on short-term note Cash paid on long-term note Cash received from issuing stock Cash paid for dividends Net cash used in financing activities 0 Net increase (decrease) in cash $3,400 Cash balance at beginning of year Cash balance at end of year $3,400

Answer 1