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 $ 49,800 65,810 275,656 1,250 392,516 157,500 (36.625 ) $ 513,391 $ 73,500 50,625 251,800 1.875 377,800 108. eee (46,880) $439.899 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 $ 53.141 10.888 63,141 65,800 128, 141 $ 114.675 6.800 120,675 48,750 169,425 150, 250 162,750 37.500 185,800 $ 513,391 120, 125 $ 439,800 $ 582,500 285.000 297,500 FORTEN COMPANY Income Statement For Current Year Ended December 31 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 Current Year 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. Pald $50,125 cash to reduce the long-term notes payable. f. Issued 2,500 shares of common stock for $20 cash per share. g. Declared and pald cash dividends of $50,100. 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.) FORTEN COMPANY Statement of Cash Flows For Current Year Ended December 31 Cash flows from operating activities Net income $ 114,975 Adjustments to reconcile net income to net cash provided by operations: Depreciation expense Accounts receivable increase Inventory increase Prepaid expense decrease Accounts payable decrease Loss on disposal of equipment $ 114.975 Net cash provided by operating activities Cash flows from investing activities Cash received from sale of equipment Cash paid for equipment Net cash used in investing activities Cash flows from financing activities: Cash borrowed on short-term note Cash received from issuing stock Cash paid for dividends $ 114,975 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 $ 114,975
