Chapter 12 Homework G Saved Check my work mode : This shows what is correct or incorrect for the work you have completed so far. It does n Required information [The following information applies to the questions displayed below.] Forten 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 points FORTEN COMPANY Comparative Belance Shects DeembeT 31. 2017 ad 2016 Asscts S 63, 400 79, 360 289, 156 1.300 133, 216 148, 500 (41, 125) S 540, 591 S 82, 500 59, 625 260, 800 ccounts receivable Invcntory Prcpaid oxponses Total current assets Equipment Accum. depreciation Equipment Total assets Liabilities and Equity Accoun payahle Short term notes payable Total current liabilities Long-term notes payable Total liabilitics Equity Common stock, S5 par value Paid-in capital in cxcoss of par, common stock Rctained carnings Total liabilities and cquity 105, 000 117, 000 (5O, 500) S 471, 500 S 128, 175 7, 800 135, 975 57. 750 135, 311193, 725 S 62, 141 12, 700 74, 841 60. 500 180, 750 16, 500 178, 000 S 540, 591 159, 250 18, 525 S 471, 500 FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016 2016 2017 AssetS Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation Equipment Total assets 63, 400 79, 360 289, 156 1, 300 433, 216 148, 500 (41, 125) 540, 591 82, 500 59, 625 260, 800 2, 075 405, 000 117, 000 (50, 500) 471, 500 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 128, 175 7, 800 135, 975 57, 750 193, 725 62, 141 12, 700 74, 841 60, 500 135, 341 180, 750 46, 500 178, 000 540, 591 159, 250 118, 525 471, 500 FORTEN COMPANY Income Statement For Year Ended December 31, 2017 627, 500 294, 000 333, 500 Sales Cost of goods sold Gross profit Operating expenses $ 29, 750 141, 400 Depreciation expense Other expenses Other gains (losses) 171, 150 (14, 125) 148, 225 36, 850 111, 375 Loss on sale of equipment Income before taxes Income taxes expense Net income Additional Information on Year 2017 Transactions a. The loss on the cash sale of equipment was $14,125 (details in b) b. Sold equipment costing $73,875, with accumulated depreciation of $39,125, for $20,625 cash. c. Purchased equipment costing $105,375 by paying $48,000 cash and signing a long-term note payable for the balance d. Borrowed $4,900 cash by signing a short-term note payable e. Paid $54,625 cash to reduce the long-term notes payable. f. Issued 3,400 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $51,900 Required: 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.) Answer is complete but not entirely correct. FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2017 Cash flows from operating activities Net income 111,375 Adjustments to reconcile net income to net cash provided by operations 29,750 14,125 (19,735) (28,356) 775 (66,034) Depreciation expense Loss on disposal of equipment Accounts receivable increase Inventory increase Prepaid expense decrease Accounts payable decrease Net cash provided by operating activities Cash flows from investing activities $ 41,900 20,625 Cash received from sale of equipment Cash paid for equipment (48,000) Net cash used in investing activities Cash flows from financing activities (27,375) 68,000 (51,900) (4,900) (54,625) (33,625) Cash received from issuing stock Cash borrowed on short-term note Cash paid on long-term note Cash paid for dividends (77,050) $ (62,525) 82,500 $ 19,975 Net cash used in financing activities Net increase (decrease) in cash Cash balance at beginning of year Cash balance at end of year