Question

Refer to the information reported about Forten Company in Problem 16-3A. Required Prepare a complete statement of cash flows using a spreadsheet as in Exhibit 16A.1; report its operating activities using the indirect method. Identify the debits and credits in the Analysis of Changes columns with letters that correspond to the following list of transactions and events. 1. Net income was $114,975. 2. Accounts receivable increased. 3. Inventory increased. 4. Prepaid expenses decreased. 5. Accounts payable decreased. 6. Depreciation expense was $20,750. 7. Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash. This yielded a loss of $5,125. 8. Purchased equipment costing $96,375 by paying $30,000 cash and (i.) by signing a long-term note payable for the balance. 9. Borrowed $4,000 cash by signing a short-term note payable. 10. Paid $50,125 cash to reduce the long-term notes payable. 11. Issued 2,500 shares of common stock for $20 cash per share. 12. Declared and paid cash dividends of $50,100.

Check Analysis of Changes column totals, $600,775 ________________________________________

FORTEN COMPANY Income Statement For Year Ended December 31, 2017 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 FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016 2017 2016 Assets Cash $ 49,800 $ 73,500 Accounts receivable 65,810 50,625 Inventory 275,656 251,800 Prepaid expenses 1,250 1,875 Total current assets 392,516 377,800 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 Total current liabilities 63,141 120,675 Long-term notes payable 65,000 48,750 Total liabilities 128,141 169,425 Equity 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

Answer 1

FORTEN COMPANY
Statement of Cash Flows (Indirect Method)
For the Year ended Dec 31, 2017
Cash Flow from opearating activities:
Net Income		114,975
Add/(Less) non cash effects on operating activities
Depreciation expense	20,750
Loss on Sale of Land	5,125
Increase in Accounts Receivables	(15,185)
Increase in Inventory	(23,856)
Decrease in Prepaid Expenses	625
Decrease in Accounts Payables	(61,534)	(74,075)
Net Cash provided by operating activities		40,900
Cash flow from Investing Activities
Purchase of Equipment	(30,000)
Sale of Equipment	11,625
Net Cash used by Investing activities		(18,375)
Cash Flow from Financing Activities
Issue of Notes Payable - short term	4,000
Payment of Note Payable - Long term	(50,125)
Issue of Common stock	50,000
Cash dividend paid	(50,100)
Net Cash used by Financing activities		(46,225)
Net Increase / (Decrease) in Cash		(23,700)
Cash balance at the beginning - Dec 31, 2016		73,500
Cash balance at the end - Dec 31, 2017		49,800