Problem 12-3A Indirect: Statement of cash flows LO A1, P1, P2, P3 Forten Company, a merchandiser, recently completed its calendar-year 2015 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 are initially debited to Prepaid Expenses. The company's income statement and balance sheets follow. FORTEN COMPANY Comparative Balance Sheets December 31, 2015 and 2014 2015 2014 Assets Cash Accounts receivable Inventory Prepaid expenses $ 57,344 72,125 267,406 1,400 $ 67,000 56,125 240,800 1,850 Total current assets Equipment Accum. depreciation Equipment Total assets 398,275 152,250 (43,300) 365,775 110.000 (50,000) $ 507,225 $ 425,775 Liabilities and Equity Accounts payable Short-term notes payable $ 59,075 8,000 $ 109,700 5,000 Total current liabilities Long-term notes payable 67.075 32,675 114,700 38,000 99,750 152,700 Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings Total liabilities and equity 160,000 37,500 209,975 147,500 125,575 0 $ 507,225 $ 425,775 FORTEN COMPANY Income Statement For Year Ended December 31, 2015 Sales Cost of goods sold $610,000 296,000 314,000 Gross profit Operating expenses Depreciation expense Other expenses $ 19,000 128,850 147,850 Other gains (losses) Loss on sale of equipment (4,250) Income before taxes Income taxes expense 161,900 28,500 Net income $ 133,400 Additional Information on Year 2015 Transactions a. The loss on the cash sale of equipment was $4,250 (details in b). b. Sold equipment costing $44,550, with accumulated depreciation of $25,700, for $14,600 cash. c. Purchased equipment costing $86,800 by paying $50,000 cash and signing a long-term note payable for the balance. Additional Information on Year 2015 Transactions a. The loss on the cash sale of equipment was $4,250 (details in b). b. Sold equipment costing $44,550, with accumulated depreciation of $25,700, for $14,600 cash. c. Purchased equipment costing $86,800 by paying $50,000 cash and signing a long-term note payable for the balance. d. Borrowed $3,000 cash by signing a short-term note payable. e. Paid $42,125 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 $49,000. 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.) FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2015 Cash flows from operating activities Net Income Adjustments to reconcile net income to net cash provided by operations: Cash flows from investing activities Cash flows from financing activities: Net increase (decrease) in cash Cash balance at beginning of year Cash balance at end of year