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. $ 662,500 301,000 361,500 FORTEN COMPANY Income Statement For Current Year Ended December 31 Sales Cost of goods sold Gross profit Operating expenses (excluding depreciation) $ 148,400 Depreciation expense 36,750 Other gains (losses) Loss on sale of equipment Income before taxes Income taxes expense Net income 185, 150 (21,125) 155, 225 46,650 $ 108,575 FORTEN COMPANY Comparative Balance Sheets December 31 Current Year Prior Year $ 73,900 89,930 299,656 1,370 464,856 141,500 (44,625) $ 561,731 $ 89,500 66,625 267,800 2,215 426, 140 124,000 (54,000) $ 496, 140 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 $ 69,141 71,800 140, 941 $ 138,675 73,950 212,625 186,750 61,500 172,540 $ 561,731 166,250 0 117,265 $ 496, 140 Additional Information on Current Year 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 notes payable for the balance. d. Paid $52,525 cash to reduce the long-term notes payable. e. Issued 4,100 shares of common stock for $20 cash per share. f. Declared and paid cash dividends of $53,300. FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 $ 108,575 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 36,750 Changes in current assets and current liabilities Increase in accounts receivable 23,305 $ 168,630 Cash flows from investing activities 0 Cash flows from financing activities: 0 $ 168,630 Net increase (decrease) in cash Cash balance at December 31, prior year Cash balance at December 31, current year $ 168,630