Forten Company's current year income statement, comparative balance sheets, and additional information follow. 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. FORTEN COMPANY Comparative Balance Sheets December 31 Current Year Prior Year $ 79,900 95,970 305,656 1,410 482,936 137,500 (46,625) $573,811 $ 93,500 70,625 271,800 2,295 438, 220 128,000 (56,000) $510, 220 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 $ 73,141 16,000 89,141 55,000 144,141 $144,675 10,000 154,675 68,750 223, 425 192,750 67,500 169, 420 $573, 811 170,250 0 116,545 $510,220 $682,500 305,000 377,500 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 40,750 Other expenses 152,400 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 193, 150 (25, 125) 159, 225 52,250 $ 106,975 Additional Information on Current Year Transactions a. The loss on the cash sale of equipment was $25,125 (details in b). b. Sold equipment costing $106,875, with accumulated depreciation of $50,125, for $31,625 cash. c. Purchased equipment costing $116,375 by paying $70,000 cash and signing a long-term note payable for the balance. d. Borrowed $6,000 cash by signing a short-term note payable. e. Paid $60,125 cash to reduce the long-term notes payable. f. Issued 4,500 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $54,100. Required: 1. Prepare a complete statement of cash flows using the indirect method for the current year. (Amounts to be deducted should be indicated with a minus sign.) FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Adjustments to reconcile net income to net cash provided by operations: 0 Cash flows from investing activities 0 Cash flows from financing activities: 0 $ 0 Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year 0 FORTEN COMPANY Spreadsheet for Statement of Cash Flows For Current Year Ended December 31 Analysis of Changes December 31, Prior Debit Credit Year December 31, Current Year Balance sheet-debit Cash $ $ 79,900 Accounts receivable 93,500 70,625 271,800 2,295 Inventory Prepaid expenses Equipment 128,000 566,220 $ $ 79,900 $ 56,000 144,675 Balance sheet-credit Accumulated depreciation Equipment Accounts payable Short-term notes payable Long-term notes payable Common stock, $5 par value Paid-in capital in excess of par value, common stock Retained earnings 10,000 68,750 170,250 0 116,545 566,220 $ $ 566,220 0 Statement of cash flows Operating activities Investing activities Financing activities Investing activities Financing activities Non cash investing and financing activities Purchase of equipment financed by long-term note payable $ 0 $ 0 Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities $ 0 Cash flows from investing activities 0 Cash flows from financing activities Oo Net increase (decrease) in cash 0 0 Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year 0
