225 Problem 12-3A Indirect: Statement of cash flows LO A1, P1, P2, P3 orten 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 Assets 2017 Cash 49,800 Accounts receivable 65,810 Inventory 275,656 Prepaid expenses 1,250 Total current assets 392,516 Equipment 157,500 Accum. depreciation--Equipment (36,625 ) Total assets 513,391 Liabilities and Equity Accounts payable 53,141 Short-term notes payable 10,000 Total current liabilities 63,141 Long-term notes payable 65,000 Total liabilities 128,141 Equity Common stock, $5 par value 162,750 Paid-in capital in excess of par, common stock 37,500 Retained earnings 185,000 Total liabilities and equity $ 513,391 2016 73,500 50,625 251,800 1,875 377,800 108,000 (46,000) 439,800 $ $ 114,675 6,000 120,675 48,750 169,425 150,250 120,125 439,800 $ $ 582,500 285,000 297,500 FORTEN COMPANY Income Statement For Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense 20,750 Other expenses 132.400 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 153,150 (5.125 139,225 24,250 114,975.0 $ Additional Information on Year 2017 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 note payable for the balance. d. Borrowed $4,000 cash by signing a short-term note payable. e. Paid $50,125 cash to reduce the long-term notes payable. f. Issued 2,500 shares of common stock for $20 cash per share. 8. Declared and paid cash dividends of $50,100. Part 2 Analyze and discuss the statement of cash flows prepared in part 1. giving special attention to the wisdom of the cash dividend. entequired: 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.) Statement of Cash Flows For Year Ended December 31, 20 Cash flows from operating activities: Adjustments to reconcile net income to net cash provided by operating activitie Changes in current assets and current liabilities Net cash provided by operating activities Cash flows from investing activities: Net cash used in investing activities Cash flows from financing activities: Net cash used in financing activities Noncash investing and financing activities