Problem 12-3A Indirect: Statement of cash flows A1 P2 P3 current year. operating activities section of the statement of cash flows using the direct method for the Forten Company's current-year income statement, comparative balance sheets, and additional information fol low. 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 Income Statement For Current Year Ended December 31 FORTEN COMPANY Comparative Balance Sheets December 31 Current Year Prior Year $582.500 285,000 297,500 Assets 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 $ 20.750 132,400 153,150 $ 49,800 65,810 275,656 1.250 392,516 157,500 (36,625) $513.391 $ 73,500 50,625 251,800 1,875 377,800 108,000 145,000 $439,800 15.125 139,225 24,250 $114.975 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 abilities Equity Common stock, $5 par value Pald-in capital in excess of par, common stock... Retained earnings.. Total liabilities and equity $ 53,141 10.000 63,141 65,000 128,141 $114,675 6.000 120,675 48,750 169,425 Additional Information on Current-Year Transactions a. The loss on the cash sale of equipment was $5,125 (details in b). b. Sold equipment costing $46,875, with accumulated depreciation of $30,125, for $11,625 cash. c. Purchased equipment costing $96,375 by paying $30,000 cash and signing a long-term note payable for the balance. d. Borrowed $4,000 cash by signing a short-term note payable. e. Paid $50,125 cash to reduce the long-term notes payable. f. Issued 2,500 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $50,100. 162.750 37.500 185,000 $513,391 150.250 0 120,125 $439,800 Chapter 12 Reporting Cash Flows 483 Check Cash from opening activities, $40,900 Required 1. Prepare a complete statement of cash flows using the indirect method for the current year. Disclose any noncash investing and financing activities in a note. Analysis Component 2. Analyze and discuss the statement of cash flows prepared in part 1, giving special attention to the wisdom of the cash dividend payment. Refer to the information reported about Forten Company in Problem 12-3A. Problem 12-4A Indirect: Cash flows spreadsheet DA the init
