Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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, (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
Assets
Cash $ 75,400 $ 90,500
Accounts receivable 91,440 67,625
Inventory 301,156 268,800
Prepaid expenses 1,380 2,235
Total current assets 469,376 429,160
Equipment 140,500 125,000
Accum. depreciationEquipment (45,125 ) (54,500 )
Total assets $ 564,751 $ 499,660
Liabilities and Equity
Accounts payable $ 70,141 $ 140,175
Short-term notes payable 15,100 9,400
Total current liabilities 85,241 149,575
Long-term notes payable 56,500 65,750
Total liabilities 141,741 215,325
Equity
Common stock, $5 par value 188,250 167,250
Paid-in capital in excess of par, common stock 63,000 0
Retained earnings 171,760 117,085
Total liabilities and equity $ 564,751 $ 499,660

FORTEN COMPANY Income Statement For Current Year Ended December 31
Sales $ 667,500
Cost of goods sold 302,000
Gross profit 365,500
Operating expenses
Depreciation expense $ 37,750
Other expenses 149,400 187,150
Other gains (losses)
Loss on sale of equipment (22,125 )
Income before taxes 156,225
Income taxes expense 48,050
Net income $ 108,175

Additional Information on Current Year Transactions

  1. The loss on the cash sale of equipment was $22,125 (details in b).
  2. Sold equipment costing $97,875, with accumulated depreciation of $47,125, for $28,625 cash.
  3. Purchased equipment costing $113,375 by paying $64,000 cash and signing a long-term note payable for the balance.
  4. Borrowed $5,700 cash by signing a short-term note payable.
  5. Paid $58,625 cash to reduce the long-term notes payable.
  6. Issued 4,200 shares of common stock for $20 cash per share.
  7. Declared and paid cash dividends of $53,500.

Required: Prepare a complete statement of cash flows using the direct method. (Amounts to be deducted should be indicated with a minus sign.)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing A Complete Guide

Authors: Gerardus Blokdyk

2023rd Edition

1038805538, 978-1038805539

More Books

Students also viewed these Accounting questions