FORTEN COMPANY Comparative Balance Sheets December 31, 2017 and 2016 2017 2016 $582,500 Assets Cash 285,000 Accounts receivable 297,500 Inventory $ 49,800 65,810 275,656 1,250 392,516 157,500 $ 73,500 50,625 251,800 1,875 377,800 108,000 Prepaid expenses Total current assets Equipment 153,150 Accum. depreciation- Equipment Total assets (5,125 Liabilities and Equity (36,625) _146,000) $513,391 $439,800 139,225 Accounts payable Problem 16-3A Indirect: Statement of cash flows A1 P1 P2 P3 FORTEN COMPANY Income Statement Forten Company, a merchandiser, recently completed its calendar-year 2017 For Year Ended December 31, 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 Sales on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, Cost of goods sold and (5) Other Expenses are paid in advance and are initially debited to Prepaid Gross profit Expenses. The company's income statement and balance sheets follow. Additional Information on Year 2017 Transactions Operating expenses Required: Depreciation expense $ 20,750 1) Prepare a complete statement of cash flows using a spreadsheet as in Exhibit 16A.1; report its operating activities using the indirect method. Identify the debits and credits in the Analysis of Other expenses 132,400 changes columns with letters that correspond to the following list of transactions and events. Other gains (losses) 2) Prepare a complete statement of cash flows; report its operating activities using the indirect method. Disclose any noncash investing and financing activities in a note. Loss on sale of equipment 3) Analysis Component Analyze and discuss the statement of cash flows prepared in part 1, giving special attention to the Income before taxes wisdom of the cash dividend payment. Income taxes expense Net income a) Net income was $114,975. b) Accounts receivable increased. c) Inventory increased. d) Prepaid expenses decreased. e) Accounts payable decreased. f) Depreciation expense was $20,750. B) Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash. This yielded a loss of $5,125. h) Purchased equipment costing $96,375 by paying $30,000 cash and (i.) by signing a long-term note payable for the balance. i) Borrowed $4,000 cash by signing a short-term note payable. j) Paid $50,125 cash to reduce the long-term notes payable. k) Issued 2,500 shares of common stock for $20 cash per share. 1) Declared and paid cash dividends of $50,100. Check Analysis of Changes column totals, $600,775 Check Cash from operating activities, $40,900 $ 53,141 10,000 63,141 65,000 128,141 $114,675 6,000 120,675 48.750 169,425 Short-term notes payable 24,250 Total current liabilities $114,975 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 162,750 150,250 37,500 0 185.000 $513,391 120,125 $439,800