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 $ 667,500 Cost of goods sold 302,000 Gross profit Operating expenses (excluding depreciation) $ 149,400 Depreciation expense Other gains (losses) 365,500 37,750 187,150 Loss on sale of equipment Income before taxes. (22,125) 156,225 Income taxes expense Net income Assets Cash Accounts receivable FORTEN COMPANY Comparative Balance Sheets December 31 48,050 $108,175 Current Year Prior Year $ 75,400 91,440 $ 90,500 67,625 268,800 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 301,156 1,380 2,235 469,376 429,168 140,500 125,000 (45,125) $564,751 $ 70,141 71,600 141,741 188,250 63,000 171,760 (54,500) $ 499,660 $ 140,175 75,150 215,325 167,250 $ 564,751 0 117,085 $ 499,660 Additional Information on Current Year Transactions a. The loss on the cash sale of equipment was $22,125 (details in b). b. Sold equipment costing $97,875, with accumulated depreciation of $47,125, for $28,625 cash. c. Purchased equipment costing $113,375 by paying $64,000 cash and signing a long-term notes payable for the balance. d. Paid $52,925 cash to reduce the long-term notes payable. e. Issued 4,200 shares of common stock for $20 cash per share. 1. Declared and paid cash dividends of $53,500. 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.) 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 Depreciation expense Increase in inventory Changes in current assets and current liabilities $ 108,175 $ 108,175 Adjustments to reconcile net income to net cash provided by operations: Income statement items not affecting cash Depreciation expense Increase in inventory Changes in current assets and current liabilities Cash flows from investing activities Cash paid for equipment Cash received from sale of equipment Cash flows from financing activities: Cash borrowed on short-term note Cash paid on long-term notes Cash received from issuing stock Cash paid for dividends i Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ 108,175 0 0 $ 108,175 $ 108,175 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 $ 90,500 67,625 268,800 2,235 Analysis of Changes December 31, Debit Credit Current Year $ 75,400 125,000 $ 554,160 $ 75,400 $ 54,500 140,175 75,150 Long-term notes payable Common stock, $5 par value 167,250 Paid-in capital in excess of par value, common stock 0 Retained earnings 117,085 $ 554,160 Statement of cash flows Operating activities $ 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 0 117,085 $ 554,160 Purchase of equipment financed by long-term notes payable $ 0 $ 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