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. FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016 2017 2016 $ 69, 400 85, 400 295, 156 1, 340 451, 296 144, 500 (43, 125) $ 552, 671 $ 86,500 63,625 264, 800 2, 155 417,080 121,000 (52,500) $ 485, 580 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets 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 $ 66, 141 13, 900 80, 041 58, 500 138, 541 $ 134, 175 8,600 142, 775 61, 750 204, 525 188, 750 50, 500 174, 880 $ 552, 671 163, 250 0 117, 805 $ 485, 580 $ 647,500 298,000 349,500 FORTEN COMPANY Income Statement For Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 33, 750 Other expenses 145, 400 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 179, 150 (18, 125) 152, 225 42, 450 $ 109, 775 Problem 12-5AB Direct: Statement of cash flows LO P1, P3, P5 Additional Information on Year 2017 Transactions a. The loss on the cash sale of equipment was $18,125 (details in b). b. Sold equipment costing $85,875, with accumulated depreciation of $43,125, for $24,625 cash. c. Purchased equipment costing $109,375 by paying $56,000 cash and signing a long-term note payable for the balance. d. Borrowed $5,300 cash by signing a short-term note payable. e. Paid $56,625 cash to reduce the long-term notes payable. f. Issued 3,800 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $52,700. Required: Prepare a complete statement of cash flows; report its operating activities according to the direct method (Amounts to be deducted should be indicated with a minus sign.) FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2017 Cash flows from operating activities Cash received from customers Cash paid for inventory Cash paid for other expenses Cash paid for income taxes $ 0 Net cash provided by operating activities Cash flows from investing activities 0 Net cash provided by investing activities Cash flows from financing activities 0 $ 0 Net increase (decrease) in cash Cash balance at beginning of year Cash balance at end of year 0