Problem 16-3AB Direct Statement of cash flows LO P1, P3, P5 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) purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for invent and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company balance sheets and income statement follow. FORTEN COMPANY Comparative Balance Sheets December 31, 2013 and 2012 2013 Assets Cash Accounts receivable Merchandise inventory Prepaid expenses Equipment Accum. depreciation-Equipment s 49,000 73.000 54,000 275,500 251,500 1,900 157,500108,000 (30,125) (40,000) 65,830 1,250 Total assets $ 518,955 $448,400 Liabilities and Equity Accounts payable Short-term notes payable Long-term notes payable Common stock, $5 par value Paid-in capital in excess of par, common stock Retained eamings s 55,330 115,000 7,000 10,00049,000 65,000 162,500150,250 0 89,375127,150 36,750 Total liabilities and equity S 518,955 $448,400 FORTEN COMPANY Income Statement For Year Ended December 31, 2013 Sales Cost of goods sold Gross profit Operating expenses $584,000 286,000 298,000 $ 20,000 Depreciation expense Other expenses 132,800 152,800 Other gains (losses) Loss on sale of equipment (5,125) Income before taxes ncome taxes expense 140,075 24.250 Ne t income $ 115,825