12-3A Indirect: Statement of cash flows A1 P2 P3 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, and (4) all debits to Accounts Payable reflect cash payments for inventory. FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales $582,500 Cost of goods sold 285,000 Gross profit 297.500 Operating expenses (excluding depreciation) $132,400 Depreciation expense 20,750 153,150 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income At December 311 Assets FORTEN COMPANY Comparative Balance Sheets (5.125) 139.225) 24,250 $114,975 Current Year Prior Year At December 31 Assets FORTEN COMPANY Comparative Balance Sheets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets Liabilities and Equity Current Year Prior Year $ 49,800 $ 73,500 65,810 50,625 275,656 251,800 1,250 1,875 392,516 377,800 157,500 108,000 (36.625) (46,000) $513,391 $439,800 $ 53,141 $114,675 75,000 54,750 128,141 169,425 Accounts payable Long-term notes payable Total liabilities 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 Additional Information on Current-Year Transactions a. The loss on the cash sale of equipment was $5,125 (details in b). b. Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash. Retained earnings Total liabilities and equity 185,000 120,125 $513,391 $439,800 Additional Information on Current-Year Transactions a. The loss on the cash sale of equipment was $5,125 (details in b). b. Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash. c. Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term notes payable for the balance. d. Paid $46,125 cash to reduce the long-term notes payable. e. Issued 2,500 shares of common stock for $20 cash per share. f. Declared and paid cash dividends of $50,100. Required 1. Prepare a complete statement of cash flows using the indirect method for the current year. Disclose any noncash investing and financing activities in a note. Check Cash from operating activities, $40,900 Analysis Component 2. Analyze and discuss the statement of cash flows prepared in part 1, giving special attention to the wisdom of the cash dividend payment