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4 1.25 polis 00:42:34 Required information Forten Company, a merchandiser, recently completed its calendar-year 2017 operations. 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 ore initially debited to Prepaid Expenses. The company's income statement and balance sheets follow. TORTEN COMPANY Comparative balance sheets December 31, 2017 and 2016 2017 2016 Assets Cash 63.400 12,500 Accounts receivable 79.360 59,625 Inventory 209,156 260,000 Prepaid expenses 1.100 2025 Total current at 435,216 405,000 Equipment 148,500 11,000 Accum. depreciation-Equipment (41.125 X50.500) Total ansato 5540,5913471,300 Liabilities and Equity Accounts payable 62,141 121,115 Short-term notes payable 12.200 7.000 Total current liabilities 94,841 135,975 Long-ter toteo payable 60.500 57.250 Total liabilities 135,141 193,725 Equity common stock, 65 par value 280,250 159,250 Paid-in capital in excess of par, common stock 46,500 0 Retained earnings 178,000 110525 Total liabilities and equity $540,591 $ 471,500 5 PORTEN COMPANY Income Statement For Year Ended December 31, 2017 $ 627,500 294,000 333,500 06 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense Other expenses Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income $ 29,750 141,400 171, 150 (14,125) 148, 225 36,850 $ 111,375 Additional Information on Year 2017 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. 9. Declared and paid cash dividends of $51,900, 4 Required: 1. Prepare a complete statement of cash flows, report its operating activities using the indirect method. (Amounts to be deducted should be indicated with a minus sign.) 125 points Answer is complete but not entirely correct. 8 00410 FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2017 Cash flows from operating activities Not income 14,822 Adjustments to reconcile net income to not cash provided by operations! Depreciation expense 29,750 Loss on disposal of equipment 14.125 Inventory increase (28,356) Accounts receivable increase (19,735) Prepaid expense decrease 775 Accounts payable decrease (66,034) Notes payable long-term increase 4,900 Net cash provided by operating activities Cash flows from investing activities Cash received from sale of equipment 20,625 Cash paid for equipment (48,000) olololololololo 3 $ (49,753) OO (27,375) Net cash used in investing activities Cash flows from financing activities Cash paid on long-term note Cash received from issuing stock Cash paid for dividends Cash borrowed on short-term note SOOO (54,625) 21,500 (51,900) 46,500 Net cash used in financing activities Not increase (decrease in cash Cash balance at beginning of year Cash balance at end of year (38,525) $ (115,653) 82,500 $ (33,153)