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 $ 63,400 79,360 289, 156 1,300 433,216 148,500 (41,125) $ 540,591 $ 82,500 59,625 260,800 2,075 405,000 117,000 (50,500) $ 471,500 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 $ 62,141 12,700 74, 841 60,500 135,341 $ 128,175 7,800 135,975 57,750 193,725 176,250 51,000 178,000 $540,591 159, 250 0 118,525 $ 471,500 $ 627,500 294,000 333,500 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 29,750 Other expenses 141,400 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 171,150 (14,125) 148, 225 36,850 $ 111,375 Additional Information on Current Year Transactions a. The loss on the cash sale of equipment was $14,125 (details in b). b. Sold equipment costing $73,875, with accumulated depreciation of $39,125, for $20,625 cash. c. Purchased equipment costing $105,375 by paying $48,000 cash and signing a long-term note payable for the balance. d. Borrowed $4,900 cash by signing a short-term note payable. e. Paid $54,625 cash to reduce the long-term notes payable. f. Issued 3,400 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $51,900. Problem 12-5AB Direct: Statement of cash flows LO P5 Required: Prepare a complete statement of cash flows using the direct method. (Amounts to be deducted should be Indicated with a minus sign.) FORTEN COMPANY Spreadsheet for Statement of Cash Flows For Current Year Ended December 31 Analysis of Changes December 31, Prior Year Debit Credit December 31, Current Year $ $ Balance sheetdebit Cash Accounts receivable Inventory Prepaid expenses Equipment 19,735 28,356 82,500 59,625 260,800 2,075 117,000 522,000 63,400 79,360 289,156 1,300 148,500 581,716 775 105,375 73.875 $ $ $ $ 29,750 39,125 66,034 Balance sheet-credit Accumulated depreciation-Equipment Accounts payable Short-term notes payable Long-term notes payable Common stock, $5 par value Paid-in capital in excess of par value, common stock Retained earnings 50,500 $ 128, 175 7,800 57,750 159,250 0 54,625 4,900 57,375 17,000 51,000 111,375 41,125 62,141 12,700 60,500 176,250 51,000 178,000 581,716 51,900 118,525 522,000 $ $ Statement of cash flows Operating activities Net income Depreciation expense Loss on sale of equipment Increase in accounts receivable Increase in inventory Decrease in prepaid expenses Decrease in accounts payable 111,375 29,750 14,125 19,735 28,356 775 66,034 Investing activities Payment to purchase equipment Receipt from sale of equipment 48,000 20,625 68,000 Financing activities Issued common stock for cash Payment of cash dividends Payment on long-term note Borrowed on short-term note 51,900 54,625 4,900 Non cash investing and financing activities Purchase of equipment financed by long-term note payable 57,375 57,375 672,075 $ 672,075 Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Net income $ 111,375 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense 29,750 Loss on disposal of equipment 14,125 Accounts receivable increase (19.735) Inventory increase (28,356) Prepaid expense decrease 775 Accounts payable decrease (66,034) $ 41,900 Net cash used in operating activities Cash flows from investing activities Cash paid for equipment Cash received from sale of equipment (48,000)| 20,625 (27,375) Net cash used in investing activities Cash flows from financing activities: Cash paid for dividends Cash received from issuing stock Cash borrowed on short-term note Cash paid on long-term note (51,900) 68,000 4,900 (54,625) $ 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 (33,625) (19,100) 82.500 63,400 $ FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities $ 0 Cash flows from investing activities 0 Cash flows from financing activities 0 $ 0 Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ 0