Forten Company, a merchandiser, recently completed its calendar-year 2010 operations. For the year, PROBLEM SET A I) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, 8) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for in- Problem 23-1A ventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. Forten's Statement of cash flows balance sheets and income statement follow: (indirect method) L03 L04 LO5 LO6 FORTEN COMPANY Comparative Balance Sheets December 31,2010 and 2009 2010 2009 s 49,800 73,500 65,810 50,625 251,800 Cash Accounts receivable . Merchandise inventory Prepaid expenses Equipment Accum. d Total assets Liabilities and Equity Accounts payable.. Short-term notes payable Long-term notes payable Common stock, $5 par value Paid-in capital in excess of 275,656 1,250 FORTEN COMPANY Income Statement For Year Ended December 31,2010 1,875 157,500 108,000 (36.625) (46.000) Cost of goods sold Gross profit . Operating expenses $582,500 285.000 297,500 513,391 $439,800 53,141 $114,675 6,000 Depreciation expense ....$ 20,750 10,000 Other expenses..132.400 153,150 Other gains (losses) . 162,750 150,250 Loss on sale of equipment Income before taxes . 125 139.225 24.250 $114975 37,500 185,000 120.125 Net income Total liabilities and equity