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. $ 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 (excluding depreciation) $ 135,400 Depreciation expense 23,750 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 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 Accumulated depreciation-Equipment Total assets Liabilities and Equity Accounts payable 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 74,400 130,541 $ 119, 175 58,350 177,525 167,250 42,000 182,730 $ 522,521 153, 250 0 119,655 $ 450, 430 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 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. Required: 1. Prepare a complete statement of cash flows using the indirect method for the current year. (Amounts to be deducted should be indicated with a minus sign.) $ 113,775 FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Net income 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 Decrease in accounts payable 23,750 70,310 $ 207,835 Net cash provided by operating activities Cash flows from investing activities Cash received from sale of equipment Cash paid for equipment 0 Cash flows from financing activities: Cash borrowed on short-term note Cash paid on long-term notes Cash received from issuing stock Cash paid for dividends Net cash used in financing activities Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year 0 $ 207,835 $ 207,835 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 $ $ 54,400 76,500 53,625 254,800 Accounts receivable Inventory Prepaid expenses Equipment 2,005 111,000 497,930 $ $ Balance sheet-credit Accumulated depreciation Equipment Accounts 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 58,350 153,250 0 119,655 497,930 $ Statement of cash flows Operating activities Investing activities Financing activities Non cash investing and financing activities Purchase of equipment financed by long-term notes payable