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 $ 73,900 89,930 299,656 1,370 464,856 141,500 (44,625) $561,731 $ 89,500 66,625 267,800 2,215 426, 140 124,000 (54,000) $496,140 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 $138,675 $ 69, 141 14,800 83,941 57,000 140,941 9,200 147,875 64,750 212,625 186,750 61,500 172,540 $561,731 166,250 0 117,265 $496, 140 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales $662,500 301,000 361,500 expenses $ 36,750 148, 400 185,150 Cost of goods sold Gross profit Operating Depreciation expense Other expenses Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income (21,125) 155, 225 46,650 $108,575 Additional Information on Current Year Transactions a. The loss on the cash sale of equipment was $21,125 (details in b). b. Sold equipment costing $94,875, with accumulated depreciation of $46,125, for $27,625 cash. c. Purchased equipment costing $112,375 by paying $62,000 cash and signing a long-term note payable for the balance. d. Borrowed $5,600 cash by signing a short-term note payable. e. Paid $58,125 cash to reduce the long-term notes payable. f. Issued 4,100 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $53,300. 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.) 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 Net income $ 108,575 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 36,750 Accounts receivable increase Inventory increase Prepaid expense decrease Accounts payable decrease Loss on disposal of equipment $ 145,325 Cash flows from investing activities 0 Cash flows from financing activities: 36.750 Depreciation expense Accounts receivable increase Inventory increase Prepaid expense decrease Accounts payable decrease Loss on disposal of equipment $ 145,325 Cash flows from investing activities 0 Cash flows from financing activities: 0 145,325 $ Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ 145,325
