4 ! Required information (The following information applies to the questions displayed below.) 25 points 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, (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. eBook FORTEN COMPANY Comparative Balance Sheets December 31 Print Current Year Prior Year References $ 57,400 73,320 283, 156 1,260 415, 136 152,500 (39, 125 ) $528,511 $ 78,500 55,625 256, 800 1,995 392,920 113,000 (48,500) $ 457, 420 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities 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 $ 58,141 11,500 69, 641 62,500 132,141 $ 122, 175 7,000 129,175 53,750 182,925 170,250 45,000 181, 120 $528,511 155, 250 0 119,245 $ 457, 420 $607,500 290,000 317,500 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 25,750 Other expenses 137,400 Other gains (losses) Loss on sale of equipment Tncome before taxes 163,150 (10,125) 144.225 4 $607,500 290,000 317,500 25 points FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 25,750 Other expenses 137,400 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 163, 150 eBook (10,125) 144, 225 31,250 $112,975 Print Additional Information on Current Year Transactions References a. The loss on the cash sale of equipment was $10,125 (details in b). b. Sold equipment costing $61,875, with accumulated depreciation of $35,125, for $16,625 cash. c. Purchased equipment costing $101,375 by paying $40,000 cash and signing a long-term note payable for the balance. d. Borrowed $4,500 cash by signing a short-term note payable. e. Paid $52,625 cash to reduce the long-term notes payable. f. Issued 3,000 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $51,100. Required: 1. Prepare a complete statement of cash flows using the indirect method for the current year. (Amounts to be deducted should be indicated with a minus sign.) FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Net income $ 112,975 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 163,150 Lass on disposal of equipment 10,125 Accounts receivable increase (17,695) Inventory increase (26,356) Prepaid expense decrease 735 Accounts payable decrease 64,034 4. Required information indicated with a minus sign.) 25 points FORTEN COMPANY eBook Print Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Net Income $ 112,975 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 163,150 Loss on disposal of equipment 10,125 Accounts receivable increase (17,695) Inventory increase (26,356) Prepaid expense decrease 735 Accounts payable decrease 14,034 Cash borrowed on short-term note (4,500) References 302,468 Cash flows from investing activities Inventory decrease 0 Cash flows from financing activities: 0 $ 302,468 Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ 302,468