Problem 12-2AA Indirect: Cash flows spreadsheet LO P1,P2, P3, P4

Forten Company , a merchandiser, recently completed its calendar-year 2013 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 andare initially debited to Prepaid Expenses. The company's balance sheets and income statement follow

FORTEN COMPANY

Comparative Balance Sheets

December 31, 2013 and 2012

Assets 2013 2012

Cash $ 49,600 $ 73,000

Accounts receivable 65,800 58,000

Merchandise inventory 277,500 252,000

Prepaid expenses 1,250 1,700

Equipment 158,000 108,000

Accum. depreciation Equipment (42,250) (52,000)

Total assets $ 509,900 $ 440,700

=========================

Liabilities and equity

Accounts payable $42,900 $113,000

short-term notes payable 11,000 6,000

Long-term note payable 70,000 48,500

Common stock, $5 par value 163,000 151,000

Paid-in capital in excess of par common stock 36,000 0

Retained earnings 187,000 122,200

Total liabilities and equity $509,900 $ 440,700

======================

FORTEN COMPANY

Income Statement

For Year Ended Dec. 31, 2013

Sales $ 582,000

Cost of goods sold 284,000

Gross profit 298,000

Operating expenses

Depreciation expense $20,000

Other expenses $132,800 152,800

___________

Other gains (losses)

Loss on sale of equipment (5,750)

_________

Income before taxes 139,450

Income taxes expense 24,250

_____________

Net Income $115,200

=========

Additional Information on Year 2013 Transactions

a. Net income was $115,200

b. Accounts receivable increased.

c Merchandise inventory increased.

d. Prepaid expenses decreased.

e. Accounts payable decreased.

f. Depreciation expense was $20,000.

g. Sold equipment costing $47,250, with accumulated depreciation of $29,750, for $11,750 cash. This yielded a loss of $5,750.

h. Purchased equipment costing $97,250 by paying $30,000 cash and (i.) by signing a long-term note payable for the balance

j. Borrowed $5,000 cash by signing a short-term note payable.

k. Paid $45,750 cash to reduce the long-term notes payable.

i. Issued 2,400 shares of common stock for $20 cash per share.

m. Declared and paid cash dividends of $50,400.

FORTEN COMPANY

Spreadsheet for Statement of Cash Flows

For Year Ended Dec. 31, 2013

Analysis of Changes

Dec 31, 2012 Debit Credit Dec 31, 2013

Balance sheet-debit balance acc.

Cash $ 73,000 $ 49,600

Accounts receivable 58,000

Merchandise inventoRY 252,000

Prepaid expenses 1,700

Equipment 108,000

__________

$492,700

==========

Balance sheet- credit balance acc.

Accum. depreciation-Equipment $52,000

Accounts payable 113,000

Short-term notes payable 6,000

Long-term notes payable 48,500

Common stock, $5 par value 151,000

Paid-in capital in excess of par value, 0

Retained earning 122,200

__________

$ 492,700

============

Statement of cash flows

Operating activities

Net income

Increase in account receivable

Increase increase merchandise inventory

Decrease in prepaid expenses

Decrease in accounts payable

Loss on sale of equipment

Investing activites

Receipt from sale of equipment

Payment to purchase equipment

Financing activities

Borrowed on short-term not

Payment on long-term note

Issued common stock for cash

Payments of cash dividends

Non cash investing and financing acctivities

Purchase of equipment financed by

long-term note payable