Chapter 12 Homework

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.

FORTEN COMPANY Comparative Balance Sheets December 31
	Current Year						Prior Year
Assets
Cash		$	73,900					$	89,500
Accounts receivable			89,930						66,625
Inventory			299,656						267,800
Prepaid expenses			1,370						2,215
Total current assets			464,856						426,140
Equipment			141,500						124,000
Accum. depreciationEquipment			(44,625	)					(54,000	)
Total assets		$	561,731					$	496,140
Liabilities and Equity
Accounts payable		$	69,141					$	138,675
Short-term notes payable			14,800						9,200
Total current liabilities			83,941						147,875
Long-term notes payable			57,000						64,750
Total liabilities			140,941						212,625
Equity
Common stock, $5 par value			186,750						166,250
Paid-in capital in excess of par, common stock			61,500						0
Retained earnings			172,540						117,265
Total liabilities and equity		$	561,731					$	496,140

FORTEN COMPANY Income Statement For Current Year Ended December 31
Sales				$	662,500
Cost of goods sold					301,000
Gross profit					361,500
Operating expenses
Depreciation expense	$	36,750
Other expenses		148,400			185,150
Other gains (losses)
Loss on sale of equipment					(21,125	)
Income before taxes					155,225
Income taxes expense					46,650
Net income				$	108,575

Additional Information on Current Year Transactions

1. The loss on the cash sale of equipment was $21,125 (details in b).
2. Sold equipment costing $94,875, with accumulated depreciation of $46,125, for $27,625 cash.
3. Purchased equipment costing $112,375 by paying $62,000 cash and signing a long-term note payable for the balance.
4. Borrowed $5,600 cash by signing a short-term note payable.
5. Paid $58,125 cash to reduce the long-term notes payable.
6. Issued 4,100 shares of common stock for $20 cash per share.
7. Declared and paid cash dividends of $53,300.

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 $ 108,575 Adjustments to reconcile net income to net cash provided by operations: Accounts receivable increase Inventory increase Prepaid expense decrease Depreciation expense Accounts payable decrease Loss on disposal of equipment $ 108,575 Net cash provided by operating activities Cash flows from investing activities 0 Cash flows from financing activities: Cash flows from financing activities: 0 $ 108,575 Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ 108,575