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 2017 2016 Assets Cash $ 73,900 89, 500 89,930 299, 656 1,370 464,856 141, 500 (44, 625) (54,000) 66,625 267,800 2,215 426,140 124,000 Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment $ 561, 731 496,140 Total assets Liabilities and Equity Accounts payable Short-term notes payable $ 69,141 $ 138, 675 14,800 83,941 57,000 140,941 9,200 147,875 64,750 212, 625 Total current liabilities Long-term notes payable Total liabilities Equity Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings 194,750 53,500 172, 540 166,250 117, 265 $ 561, 731 496,140 Total liabilities and equity FORTEN COMPANY Income Statement For Year Ended December 31, 2017 662,500 301,000 361,500 Cost of goods sold Gross profit Operating expenses Depreciation expense 36, 750 148,400 185,150 Other expenses Other gains (losses) Loss on sale of equipment Income before taxes (21,125) 155, 225 46, 650 Income taxes expense $108,575 Net income Additional Information on Year 2017 Transactions a. The loss on the cash sale of equipment was $21,125 (details in b). b. Sold equipment costing $94,875, with accumulated depreciation of $46,125, for $27,625 cash. c. Purchased equipment costing $112,375 by paying $62,000 cash and signing a long-term note payable for the balancee d. Borrowed $5,600 cash by signing a short-term note payable e. Paid $58,125 cash to reduce the long-term notes payable f. Issued 4,100 shares of common stock for $20 cash per share g. Declared and paid cash dividends of $53,300 Additional Information on Year 2017 Transactions a. The loss on the cash sale of equipment was $21,125 (details in b b. Sold equipment costing $94,875, with accumulated depreciation of $46,125, for $27,625 cash. c. Purchased equipment costing $112,375 by paying $62,000 cash and signing a long-term note payable for the balance. d. Borrowed $5,600 cash by signing a short-term note payable. e. Paid $58,125 cash to reduce the long-term notes payable. f. Issued 4,100 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $53,300. Required Prepare a complete statement of cash flows; report its operating activities according to the direct method. (Amounts to be deducted should be indicated with a minus sign.) FORTEN COMPANY Statement of Cash Flows For Year Ended December 31,2017 Cash flows from operating activities 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
