Required information Forten Company, a merchandiser, recently completed its calendar-year 2017 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, 2017 and 2016 2016 2017 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets 92,950 302,656 1,390 473,896 139,500 $ 76,900 91,500 68,625 269,800 2,255 432,180 126,000 (45,625 55, 000 567,771 503,180 Liabilities and Equity Accounts payable Short-term notes payable Total current liabilities Long-term notes payable Total liabilities Equity Common stock, Paid-in capital in excess of par, common stock Retained earnings Total liabilities and equity $ 71,141 $ 141,675 9,600 151,27!5 66,750 218,025 15,400 86,541 56,000 142,54.1 198,750 55,500 170,980 $5 par value 168,250 116,905 $ 567,771 $ 503,180 FORTEN COMPANY Income Statement For Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses 672,500 303,000 369,500 Depreciation expense 38,750 150,400 189,150 Other expenses Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income (23 125) 157,225 49,450 107,775 Additional Information on Year 2017 Transactions a. The loss on the cash sale of equipment was $23,125 (details in b) b. Sold equipment costing $100,875, with accumulated depreciation of $48,125, for $29,625 cash c. Purchased equipment costing $114,375 by paying $66,000 cash and signing a long-term note payable for the balance d. Borrowed $5,800 cash by signing a short-term note payable e. Paid $59,125 cash to reduce the long-term notes payable f. Issued 4,300 shares of common stock for $20 cash per share g. Declared and paid cash dividends of $53,700 FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2017 Cash flows from operating activities Net income $ 107,775 Adjustments to reconcile net income to net cash provided by operations Depreciation expense Accounts receivable increase Inventory increase Prepaid expense decrease Accounts payable decreas Loss on disposal of equipment 38,750 (24.325) (32856) 865 (70,534) 23,125 $42,800 Net cash provided by operating activities Cash flows from investing activities Cash paid for equipment Cash received from sale of equipment (66,000) 29,625 Net cash used in investing activities (36,375) Cash flows from financing activities Cash borrowed on short-term note Cash paid on long-term note Cash received from issuing stock Cash paid for dividends 5,800 (59125) 86,000 (53,700) Net cash used in financing activities Net increase (decrease) in cash Cash balance at beginning of year Cash balance at end of year (21,025) $ (14,600) $ (14,600)
