Question

Forten Company, a merchandiser, recently completed its calendar-year 2013 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 balance sheets and income statement follow.

  

FORTEN COMPANY Comparative Balance Sheets December 31, 2013 and 2012
	2013			2012
Assets
Cash	$	49,800		$	73,500
Accounts receivable		65,810			50,625
Merchandise inventory		275,656			251,800
Prepaid expenses		1,250			1,875
Equipment		157,500			108,000
Accum. depreciation—Equipment		(36,625)			(46,000)
Total assets	$	513,391		$	439,800
Liabilities and Equity
Accounts payable	$	53,141		$	114,675
Short-term notes payable		10,000			6,000
Long-term notes payable		65,000			48,750
Common stock, $5 par value		162,750			150,250
Paid-in capital in excess of par, common stock		37,500			0
Retained earnings		185,000			120,125
Total liabilities and equity	$	513,391		$	439,800

  

FORTEN COMPANY Income Statement For Year Ended December 31, 2013
Sales				$	582,500
Cost of goods sold					285,000
Gross profit					297,500
Operating expenses
Depreciation expense	$	20,750
Other expenses		132,400			153,150
Other gains (losses)
Loss on sale of equipment					(5,125)
Income before taxes					139,225
Income taxes expense					24,250
Net income				$	114,975

  

Additional Information on Year 2013 Transactions

a.	Net income was $114,975.
b.	Accounts receivable increased.
c.	Merchandise inventory increased.
d.	Prepaid expenses decreased.
e.	Accounts payable decreased.
f.	Depreciation expense was $20,750.
g.	Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash. This yielded a loss of $5,125.
h.	Purchased equipment costing $96,375 by paying $30,000 cash and (i.) by signing a long-term note payable for the balance.
j.	Borrowed $4,000 cash by signing a short-term note payable.
k.	Paid $50,125 cash to reduce the long-term notes payable.
l.	Issued 2,500 shares of common stock for $20 cash per share.
m.	Declared and paid cash dividends of $50,100.

  

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.)

FORTEN COMPANY Spreadsheet for Statement of Cash Flows For Year Ended December 31, 2013 Analysis of Changes December 31, 2012 Debit Credit December 31, 2013 Balance sheet—debit balance accounts Cash $73,500 $49,800 Accounts receivable 50,625 Merchandise inventory 251,800 Prepaid expenses 1,875 Equipment 108,000 $485,800 $49,800 Balance sheet—credit balance accounts Accumulated depreciation—Equipment $46,000 Accounts payable 114,675 Short-term notes payable 6,000 Long-term notes payable 48,750 Common stock, $5 par value 150,250 Paid-in capital in excess of par value, common stock 0 Retained earnings 120,125 $485,800 $0 Statement of cash flows Operating activities Depreciation expense Investing activities Financing activities Non cash investing and financing activities Purchase of equipment financed by long-term note payable $0 $0

Answer 1