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 $ 76,900 92,950 302,656 1,390 473,896 139,500 (45,625) $567,771 $ 91,500 68,625 269,800 2,255 432,180 126,000 (55,000) $503,180 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-te 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 $ 71,141 15,400 86,541 56,000 142,541 $141,675 9,600 151,275 66,750 218,025 189,750 64,500 170, 980 $567,771 man 168,250 0 116,905 $503,180 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses $672,500 303,000 369,500 $672,500 303,000 369,500 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 38,750 Other expenses 150,400 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 189,150 (23,125) 157, 225 49,450 $ 107,775 Additional Information on Current Year Transactions a. The loss on the cash sale of equipment was $23,125 (details in b). b. Sold equipment costing $100,875, with accumulated depreciation of $48,125, for $29,625 cash. c. Purchased equipment costing $114,375 by paying $66,000 cash and signing a long-term note payable for the balance. d. Borrowed $5,800 cash by signing a short-term note payable. e. Paid $59,125 cash to reduce the long-term notes payable. f. Issued 4,300 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $53,700. 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.) Answer is not complete. FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Net income $ 107,775 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 38,750 Accounts receivable increase Inventory increase Prepaid expense decrease Accounts payable decrease Loss on disposal of equipment $ 146,525 Net cash provided by operating activities Cash flows from investing activities Cash paid for equipment Cash received from sale of equipment 29,625 29,625 Net cash used in investing activities Cash flows from financing activities: Cash borrowed on short-term note Cash paid on long-term note 5,800 29,625 5,800 Net cash used in investing activities Cash flows from financing activities: Cash borrowed on short-term note Cash paid on long-term note Cash received from issuing stock Cash paid for dividends 86,000 91,800 $ 267,950 Net cash used in financing activities Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ 267,950
