! Required information [The following information applies to the questions displayed below.] Forten Company's current year income statement, comparative balance sheets, and additional information follow. 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, and (4) all debits to Accounts Payable reflect cash payments for inventory. FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses (excluding depreciation) Depreciation expense other gains (losses) Loss on sale of equipment $ 597,500 288,000 309,500 $ 135,400 23,750 159,150 (8,125) Income before taxes Income taxes expense Net income 142,225 28,450 $ 113,775 FORTEN COMPANY Comparative Balance Sheets December 31 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accumulated depreciation-Equipment Total assets Liabilities and Equity Accounts payable Long-term notes payable Total liabilities Equity Current Year Prior Year $ 54,400 70,310 280,156 $ 76,500 53,625 254,800 1,280 2,005 406,146 386,930 154,500 111,000 (38,125) $ 522,521 $ 56,141 74,400 130,541 167,250 (47,500) $ 450,430 $ 119,175 58,350 177,525 Common stock, $5 par value Paid-in capital in excess of par, common stock Retained earnings Total liabilities and equity Additional Information on Current Year Transactions 153,250 42,000 182,730 119,655 $ 522,521 $ 450,430 a. The loss on the cash sale of equipment was $8,125 (details in b). b. Sold equipment costing $55,875, with accumulated depreciation of $33,125, for $14,625 cash. c. Purchased equipment costing $99,375 by paying $36,000 cash and signing a long-term notes payable for the balance. d. Paid $47,325 cash to reduce the long-term notes payable. e. Issued 2,800 shares of common stock for $20 cash per share. f. Declared and paid cash dividends of $50,700. Cash flows from operating activities Net income FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Adjustments to reconcile net income to net cash provided by operations: Income statement items not affecting cash Depreciation expense Loss on disposal of equipment Changes in current assets and current liabilities Increase in accounts receivable Increase in inventory Decrease in prepaid expenses Net cash provided by financing activities Cash flows from investing activities Cash flows from financing activities: Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ 113,775 $ 113,775 0 0 $ 113,775 76,500 $ 190,275