3 ! Required information (The following information applies to the questions displayed below.) of 2 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. $ 682,500 305,000 377,500 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses (excluding depreciation) $ 152,400 Depreciation expense 40,750 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 193, 150 (25, 125) 159, 225 52,250 $ 106,975 FORTEN COMPANY Comparative Balance Sheets December 31 Current Year Prior Year $ 79,900 95,970 305,656 1,410 482,936 137,500 (46,625 ) $ 573,811 $ 93,500 70,625 271,800 2,295 438, 220 128,000 (56,000) $ 510,220 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accumulated depreciation Equipment Total assets Liabilities and Equity Accounts payable Long-term notes payable Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings Total liabilities and equity $ 73, 141 71,000 144, 141 $ 144,675 78,750 223, 425 192,750 67,500 169,420 $ 573,811 170,250 0 116,545 $ 510,220 Additional Information on Current Year Transactions a. The loss on the cash sale of equipment was $25,125 (details in b). b. Sold equipment costing $106,875, with accumulated depreciation of $50,125, for $31,625 cash. c. Purchased equipment costing $116,375 by paying $70,000 cash and signing a long-term notes payable for the balance. d. Paid $54,125 cash to reduce the long-term notes payable. e. Issued 4,500 shares of common stock for $20 cash per share. f. Declared and paid cash dividends of $54,100. 3 Required information vi syve December 31, Prior Year December 31, Current Year Debit Credit of 2 Balance sheet-debit Cash $ $ 93,500 13,600 X $ 79,900 $ 70,625 271,800 2,295 25,345 33,856 Accounts receivable Inventory Prepaid expenses Equipment OO 95,970 305,656 1,410 137,500 $ 885 Oo 128,000 116,375 106,875 $ 566,220 620,436 $ 40,750 $ Balance sheet-credit - Accumulated depreciation Equipment Accounts payable Long-term notes payable Common stock, $5 par value Paid-in capital in excess of par value, common stock Retained earnings 56,000 144,675 78,750 50,125 71,534 54,125 OOO 46,625 73,141 71,000 170,250 46,375 22,500 67,500 106,975 OOOO 0 192,750 67,500 169,420 620,436 116,545 54,100 $ 566,220 $ 620,436 X Statement of cash flows Operating activities Net income Depreciation expense Increase in accounts receivable Increase in inventory Investing activities Payment to purchase equipment Financing activities Issued common stock for cash Payment of cash dividends Non cash investing and financing activities Purchase of equipment financed by long-term notes payable $ 1,025,896 $ 405,460