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, (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. FORTEN COMPANY Comparative Balance Sheets December 31 Current Year Prior Year $ 54,400 70,310 280, 156 1,280 406, 146 154,500 (38,125) $ 522,521 $ 76,500 53,625 254,800 2,005 386,930 111,000 (47,500) $ 450, 430 Assets Cash Accounts receivable Inventory Prepaid expenses Total current assets Equipment Accum. depreciation-Equipment Total assets Liabilities and Equity Accounts payable Short-term notes payable 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 Total liabilities and equity $ 56,141 10,900 67,041 63,500 130,541 $ 119,175 6,600 125,775 51,750 177,525 153,250 167,250 42,000 182,730 $ 522,521 119,655 $ 450,430 $ 597,500 288,000 309,500 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses Depreciation expense $ 23,750 Other expenses 135,400 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 159,150 (8,125) 142,225 28,450 $ 113,775 Additional Information on Current Year Transactions 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 note payable for the balance. d. Borrowed $4,300 cash by signing a short-term note payable. e. Paid $51,625 cash to reduce the long-term notes payable. f. Issued 2,800 shares of common stock for $20 cash per share. g. Declared and paid cash dividends of $50,700. FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Adjustments to reconcile net income to net cash provided by operations: Cash flows from investing activities Cash flows from 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 FORTEN COMPANY Spreadsheet for Statement of Cash Flows For Current Year Ended December 31 Analysis of Changes December 31, Prior Year Debit Credit December 31, Current Year Balance sheet-debit Cash S S 54,400 Accounts receivable Inventory Prepaid expenses Equipment 76.500 53,625 254.800 2.005 111.000 497.930 S $ Balance sheet-credit Accumulated depreciation Equipment Accounts payable Short-term notes payable Long-term notes payable Common stock, $5 par value Paid-in capital in excess of par value, common stock Retained earnings 47,500 119.175 6.800 51.750 153.250 119.655 497.930 Statement of cash flows Operating activities Investing activities Financing activities Non cash investing and financing activities Purchase of equipment financed by long-term note payable