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 $ 49,800 $ 73,500 Accounts receivable 65,810 50,625 Inventory 275,656 251,800 Prepaid expenses 1,250 1,875 Total current assets 392,516 377,800 Equipment 157,500 108,000 Accum. depreciation-Equipment (36,625) (46,000) Total assets $513, 391 $439,800 Liabilities and Equity Accounts payable $ 53,141 $114,675 Short-term notes payable 10,000 6,000 Total current liabilities 63,141 120,675 Long-term notes payable 65,000 48,750 Total liabilities 128, 141 169,425 Equity Common stock, $5 par value 162,750 150,250 Paid-in capital in excess of par, common stock 37,500 @ Retained earnings 185,000 120, 125 Total liabilities and equity $513, 391 $439,800 $582,500 285,000 297,500 FORTEN COMPANY Income Statement For Year Ended December 31, 2017 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 20,750 Other expenses 132,400 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 153, 150 (5,125) 139,225 24,250 $114,975 Additional Information on Year 2017 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. 9. Declared and paid cash dividends of $50,100, 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.) X Answer is complete but not entirely correct. FORTEN COMPANY Statement of Cash Flows For Year Ended December 31, 2017 Cash flows from operating activities Cash received from customers 567,315 Cash paid for inventory (370,390) Cash paid for other expenses (131,775) Cash paid for income taxes (24,250) $ 40,900 Net cash provided by operating activities Cash flows from investing activities Cash paid for equipment Cash received from sale of equipment 49,500 X (30,000) 19,500 Net cash used in investing activities Cash flows from financing activities Cash paid for dividends Cash received from issuing stock (50,100) 12,500 (50,125) 4,000 Cash paid on long-term note Cash borrowed on short-term note Net cash used in financing activities Net increase (decrease) in cash Cash balance at beginning of year Cash balance at end of year (83,725) $ (23,325) 73,500 $ 50,175