Forten Company, a merchandiser, recently completed its calendar-year 2015 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 companys income statement and balance sheets follow.

FORTEN COMPANY Comparative Balance Sheets December 31, 2015 and 2014
	2015			2014
Assets
Cash	$	66,814		$	69,000
Accounts receivable		74,925			58,125
Inventory		264,406			236,800
Prepaid expenses		1,480			1,950
Total current assets		407,625			365,875
Equipment		156,350			114,000
Accum. depreciationEquipment		(47,500)			(54,000)
Total assets	$	516,475		$	425,875
Liabilities and Equity
Accounts payable	$	58,675		$	110,300
Short-term notes payable		8,800			5,400
Total current liabilities		67,475			115,700
Long-term notes payable		32,475			40,000
Total liabilities		99,950			155,700
Equity
Common stock, $5 par value		163,000			148,500
Paid-in capital in excess of par, common stock		43,500			0
Retained earnings		210,025			121,675
Total liabilities and equity	$	516,475		$	425,875

Additional Information on Year 2015 Transactions
a.	The loss on the cash sale of equipment was $4,350 (details in b).
b.	Sold equipment costing $45,050, with accumulated depreciation of $25,900, for $14,800 cash.
c.	Purchased equipment costing $87,400 by paying $52,000 cash and signing a long-term note payable for the balance.
d.	Borrowed $3,400 cash by signing a short-term note payable.
e.	Paid $42,925 cash to reduce the long-term notes payable.
f.	Issued 2,900 shares of common stock for $20 cash per share.
g.	Declared and paid cash dividends of $50,600.

	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.)

A Company is planning to add a new product to its line. To manufacture this product, the company needs to buy a new machine at a $515,000 cost with an expected four-year life and a $15,000 salvage value. All sales are for cash, and all costs are out-of-pocket, except for depreciation on the new machine. Additional information includes the following. (FV of $1, PV of $1, FVA of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Expected annual sales of new product	$	1,920,000
Expected annual costs of new product
Direct materials		480,000
Direct labor		680,000
Overhead (excluding straight-line depreciation on new machine)		336,000
Selling and administrative expenses		173,000
Income taxes		38	%
1. Compute the net present value for this machine using a discount rate of 7% and assuming that cash flows occur at each year-end. (Hint: Salvage value is a cash inflow at the end of the assets life.) (Do not round intermediate calculations.)

FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2015 Cash flows from operating activities Net Income 138,950 Adjustments to reconcile net income to net cash provided by operations: Loss on disposal of equipment 4,350 19,400 Accounts receivable increase Inventory increase Prepaid expense decrease Accounts payable decrease Cash borrowed on short-term note 162,700 Net cash provided by operating activites Cash flows from investing activities Cash received from sale of equipment Cash paid for equipment Net cash provided by investing activities Cash flows from financing activities: Cash paid on long-term note Cash received from issuing stock Cash paid for dividends Net cash provided by financing activities Net increase (decrease) in cash Cash balance at beginning of year Cash balance at end of year 162,700 162,700