Question
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
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 | $ 677,500 | |
|---|---|---|
| Cost of goods sold | 304,000 | |
| Gross profit | 373,500 | |
| Operating expenses (excluding depreciation) | $ 151,400 | |
| Depreciation expense | 39,750 | 191,150 |
| Other gains (losses) | ||
| Loss on sale of equipment | (24,125) | |
| Income before taxes | 158,225 | |
| Income taxes expense | 50,850 | |
| Net income | $ 107,375 | |
| FORTEN COMPANY | ||
| Comparative Balance Sheets | ||
| December 31 | ||
| Current Year | Prior Year | |
|---|---|---|
| Assets | ||
| Cash | $ 78,400 | $ 92,500 |
| Accounts receivable | 94,460 | 69,625 |
| Inventory | 304,156 | 270,800 |
| Prepaid expenses | 1,400 | 2,275 |
| Total current assets | 478,416 | 435,200 |
| Equipment | 138,500 | 127,000 |
| Accumulated depreciationEquipment | (46,125) | (55,500) |
| Total assets | $ 570,791 | $ 506,700 |
| Liabilities and Equity | ||
| Accounts payable | $ 72,141 | $ 143,175 |
| Long-term notes payable | 71,200 | 77,550 |
| Total liabilities | 143,341 | 220,725 |
| Equity | ||
| Common stock, $5 par value | 191,250 | 169,250 |
| Paid-in capital in excess of par, common stock | 66,000 | 0 |
| Retained earnings | 170,200 | 116,725 |
| Total liabilities and equity | $ 570,791 | $ 506,700 |
Additional Information on Current Year Transactions
The loss on the cash sale of equipment was $24,125 (details in b).
Sold equipment costing $103,875, with accumulated depreciation of $49,125, for $30,625 cash.
Purchased equipment costing $115,375 by paying $68,000 cash and signing a long-term notes payable for the balance.
Paid $53,725 cash to reduce the long-term notes payable.
Issued 4,400 shares of common stock for $20 cash per share.
Declared and paid cash dividends of $53,900.
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 | ||
| Adjustments to reconcile net income to net cash provided by operations: | ||
| Income statement items not affecting cash | ||
| 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 |
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Cornerstones Of Cost Management
Authors: Don R. Hansen, Maryanne M. Mowen
3rd Edition
9781305147102, 1285751787, 1305147103, 978-1285751788
