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, and (4) all debits to Accounts Payable reflect cash payments for inventory. FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold $ 582,500 285,000 Gross profit Operating expenses (excluding depreciation) Depreciation expense Other gains (losses) Loss on sale of equipment 297,500 $ 132,400 20,750 153,150 (5,125) Income before taxes 139,225 Income taxes expense Net income 24,250 $ 114,975 Assets Cash FORTEN COMPANY Comparative Balance Sheets December 31 Current Year Prior Year $ 49,800 65,810 275,656 $ 73,500 50,625 251,800 1,875 1,250 377,800 392,516 157,500 (36,625) 108,000 (46,000) Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accumulated depreciation-Equipment Total assets Liabilities and Equity Accounts payable 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 $ 513,391 $ 439,800 $ 53,141 $ 114,675 75,000 128,141 54,750 169,425 162,750 37,500 185,000 $ 513,391 150,250 0 120,125 $ 439,800 Assets Cash FORTEN COMPANY Comparative Balance Sheets December 31 Current Year Prior Year $ 49,800 65,810 275,656 $ 73,500 50,625 251,800 Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accumulated depreciation-Equipment Total assets Liabilities and Equity Accounts payable 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 Additional Information on Current Year Transactions 1,250 1,875 392,516 377,800 157,500 108,000 (36,625) (46,000) $ 513,391 $ 439,800 $ 53,141 $ 114,675 75,000 54,750 128,141 169,425 162,750 150,250 37,500 0 185,000 120,125 $ 513,391 $ 439,800 a. The loss on the cash sale of equipment was $5,125 (details in b). b. Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash. c. Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term notes payable for the balance. d. Paid $46,125 cash to reduce the long-term notes payable. e. Issued 2,500 shares of common stock for $20 cash per share. f. Declared and paid cash dividends of $50,100. 1. Prepare a complete statement of cash flows using the indirect method for the current year. (Amounts to be deducted should indicated with a minus sign.) Cash flows from operating activities Net income FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Adjustments to reconcile net income to net cash provided by operations: Income statement items not affecting cash Loss on disposal of equipment Changes in current assets and current liabilities Cash flows from investing activities Cash flows from financing activities: $ 114,975 + $ 114,975 0 THROU Adjustments to reconcile net income to net cash provided by operations: Income statement items not affecting cash Loss on disposal of equipment Changes in current assets and current liabilities Cash flows from investing activities Cash flows from financing activities: Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ 114,975 0 0 $ 114,975 $ 114,975 Balance sheet-debit Cash Accounts receivable Inventory Prepaid expenses Equipment Balance sheet-credit Accumulated depreciation-Equipment Accounts payable FORTEN COMPANY Spreadsheet for Statement of Cash Flows For Current Year Ended December 31 December 31, Prior Year Long-term notes payable Common stock, $5 par value Paid-in capital in excess of par value, common stock Retained earnings Statement of cash flows Operating activities $ 73,500 50,625 251,800 1,875 Analysis of Changes December 31, Debit Credit Current Year $ 49,800 108,000 $ 485,800 $ 49,800 $ 46,000 114,675 54,750 150,250 0 120,125 $ 485,800 $ 0 Paid-in capital in excess of par value, common stock Retained earnings Statement of cash flows Operating activities Investing activities Financing activities Non cash investing and financing activities Purchase of equipment financed by long-term notes payable 0 120,125 $ 485,800 $ 0 $ $ 0 FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ 0 + 0 0 $ 0 $ 0