16-3A 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 (5,125) 139,225 24,250 $114,975 At December 31 Assets Cash FORTEN COMPANY Comparative Balance Sheets Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets Current Year Prior Year $ 49,800 65,810 $ 73,500 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 Liabilities and Equity Accounts payable $ 53,141 $114,675 Long-term notes payable 75,000 54,750 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 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