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 company's income statement and balance sheets follow. 2014 FORTEN COMPANY Comparative Balance Sheets December 31, 2015 and 2014 2015 Assets Cash $ 70,944 Accounts receivable 79,125 Inventory 259,906 Prepaid expenses 1,600 $ 72,000 61,125 230,800 2,100 Total current assets 411,575 Equipment 162,500 Accum. depreciationEquipment (53,800) 366,025 120,000 (60,000) Total assets $520,275 $426,025 Liabilities and Equity Accounts payable Short-term notes payable $ 58,075 10,000 $ 111,200 6,000 Total current liabilities Long-term notes payable 68,075 24,175 117,200 43,000 92,250 160,200 167,500 150,000 Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings 0 52,500 208,025 115,825 Total liabilities and equity $520,275 $426,025 FORTEN COMPANY Income Statement For Year Ended December 31, 2015 Sales $635,000 Cost of goods sold 306,000 329,000 Gross profit Operating expenses Depreciation expense Other expenses $20,000 128,300 148,300 Other gains (losses) Loss on sale of equipment (4,500) Income before taxes Income taxes expense 176,200 31,000 Net income $145,200 Additional Information on Year 2015 Transactions a. The loss on the cash sale of equipment was $4,500 (details in b). Sold equipment costing $45,800, with accumulated depreciation of b. - $26,200, for $15,100 cash. c. Purchased equipment costing $88,300 by paying $63,000 cash and signing a long-term note payable for the balance. d. Borrowed $4,000 cash by signing a short-term note payable. e. Paid $44,125 cash to reduce the long-term notes payable. f. Issued 3,500 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $53,000. 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.) FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2015 Cash flows from operating activities Net Income Adjustments to reconcile net income to net cash provided by operations: Cash flows from investing activities Cash flows from financing activities: Net increase (decrease in cash Cash balance at beginning of year Cash balance at end of year
