Problem 12-1A Assignment Name: __________________ Instructions for Part 2 on Page 2. Problem 12-1A Req. 1 Solution Part 1 FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2013 Cash flows from operating activities Net income.......................................................................................... $114,975 Adjustments to reconcile net income to net cash provided by operating activities: Increase in accounts receivable ($65,810 - $50,625).................(15,185) Increase in inventory ($275,656 - $251,800)....................................(23,856) Decrease in prepaid expenses ($1,875 - $1,250)........................ 625 Decrease in accounts payable ($114,675 - $53,141)..................(61,534) Depreciation expense................................................................... 20,750 Loss on disposal of equipment.................................................. 5,125 Net cash provided by operating activities.................................... $ 40,900 Cash flows from investing activities Cash received from sale of equipment......................................... 11,625 Cash paid for equipment..................................................................(30,000) Net cash used in investing activities ............................................. (18,375) Cash flows from financing activities Cash borrowed on short-term note ............................................... 4,000 Cash paid on long-term note...........................................................(50,125) Cash received from issuing stock (2,500 x $20)............................ 50,000 Cash paid for dividends...................................................................(50,100) Net cash used in financing activities............................................. (46,225) Net decrease in cash ........................................................................... $(23,700) Cash balance at December 31, 2012................................................. 73,500 Cash balance at December 31, 2013................................................. $ 49,800 Noncash investing and financing activities Purchased equipment for $96,375 by signing a $66,375 long-term note payable and paying $30,000 in cash. P Part 2 Analyze the statement of cash flows solution for Part 1. Please give complete sentences and support your answers with details from the statement of cash flows. 1. How are they doing? 2. What are the major reasons that contributed to their decrease in cash during 2013? 3. How does their cash provided by operating activities compare to their cash dividend? 4. Should they have paid this dividend?